País: Chile

Organization: Fundación Contigo

Year initiative/program began: - 2008

Field of work - Banking/Financial Services

Service / Activity focus (If "other" please explain in entry form) - Delivery Method

Year organization founded (yyyy) - 1989

What is your signature innovation, your new idea, in one sentence? - To give credit access to civil society organizations that cannot win projects because of lack of financing.

Describe what makes your idea unique—different from all others in the field. - It has been noticed that NGOs are mainly financed by national and international organizations. In many cases these projects require a warranty for its faithful fulfillment. On the other side, projects provide financing against results. Both situations imply that NGOs have to have at their disposal financial resources to execute projects. If the organizations don’t count with them, they have to turn to formal financial organizations that limited provide –or not at all– financial tools so that they could face the execution of their projects. Through this innovation we look for fund delivery that give access to the capital that these organizations need. This fund is provided by Avina Foundation for the solution of financial problems of their networks’ leaders partners. This system differs from traditional market because it is a process designed and executed by NGOs for NGOs. It is supported by a financial organization that allows NGOs to increase their field of action through the execution of projects that might not have been possible to execute before because of lack of resources.

How do you implement your innovation and apply it to the challenge/problem you are addressing? - Fundación Contigo receives funds to be delivered as credits to civil society organizations (members of Avina Leaders Network), who ask for them. Both Avina and Contigo decide who will receive the credits on the basis of rules that were created this year, together with members of the Leaders Network. Credits are supported with promissory notes and with an agreement signed between the NGOs and Contigo. The goal of the agreement is to support the financed projects–executed by profit or non-profit organization–so they can have a social impact among the most socially underprivileged population. This is a requirement that emanates from Contingo’s goals which has to be fulfilled so that Contigo gives credits without violating their articles of association. Watching for the fund’s good operation, it is hoped before the end of the year to constitute an Advisory Council formed by Avina, Contigo and members of the Leaders Network; and also to have a blog that clearly shows how the fund’s transaction has been developed. All credits include an interest rate to cover operational expenses, inflation and inrrecorableness.

Do you have any existing partnerships, and if so, how did you create them? - The project implies the joint work with Avina Foundation Chile. Each credit transaction constitutes alliances with the members’ organizations of the Leaders Network. These are profit and non-profit organizations.

Provide one sentence describing your impact/intended impact. - To allow NGOs the execution of the biggest number of projects as possible.

Please list any other measures of the impact of your innovation. - Through this fund we expect to increase the incidence level of NGOs, to support their sustainability, and to decrease the precariousness derived from the scarce or null access to proper financial tools for the execution of the projects. We also expect to show that the non-profit sector is an attractive potential market to financial organizations. It’s capable of asking for and paying credits.

How many people does your innovation serve or plan to serve? Exactly who will benefit from your innovation? - The project is at a pilot stage since July 2008. It lasts 18 months. It’s expected to assist 5 organizations a year.

How is your initiative financed (or how do you expect your initiative will be financed)? - The funds come from Avina Foundation. It is expected that the funds grow in the future thanks to other donors support. The costs of the loans are covered by the organizations that ask for them through the payment of interests and through the authentication of the promissory notes.

If known, provide information on your finances and organization: -

• Annual budget
• Annual revenue generated
• Number of staff (full-time, part-time, volunteers)

• Annual Budget: USD 490,000
? Generated annual income: USD 443,000
? Number of employees: 26 full-time, 1 part-time, 4 volunteers

What are the main financial barriers and how do you plan to address them? - The most relevant barriers are:
- Access to necessary funds to lend: It is expected to obtain those funds from Avina or other donors once it is evaluated the result of the pilot stage and that the positive impact of the credits on the NGOs can be shown.
- Perception from the actors that both tools and rules are appropriate for the financial reality of the NGOs: It is expected that both the collective building of the rules and the results’ transparency of the transactions generate trust and necessary clearness to understand the financial conditions of the fund.
- Risk inherent to credit transactions with non-profit and without complete financial information actors: It is expected that the fact that a NGO grants the credit and that there’s the commitment of a financier partner, the risks decrease.

Aside from financial sustainability, how do you plan to grow the initiative? - Through the participation of other donor organizations that notice that it can be more effective to generate a financial platform than to assign only resources to direct donations. If the results are positive, it will be possible to convince investors and moneylenders that they can provide resources in credit way. It is expected that they can see in the NGOs market a proper credit subject who is responsible, solvent, and capable of fulfilling its credit obligations, and a logical, reliable, and sustainable evaluation method.

What was the motivation or defining moment that led to the creation of this innovation? Tell us the story. - Raúl Perry, CEO of Fundación Contigo, joined the Avina Leaders Network in Chile in 2001. Since the beginning of the work with Avina and other leader partners, the subject on sustainability strategies of NGOs was present in different dialogue and debate instances. One of those strategies was the option to finance foundations through the execution of projects. One of the faced obstacles was the access to necessary financing for the execution of those projects both for the payment of the warranty bills and for the financing of the first stages of the projects paid against the fulfilment of the goals. It was striking to see that the chance to execute projects was limited by the access to resources that had the possibility to be financed through credit. This restriction on accessing to financial tools generated talks with the formal banks. These talks didn’t prosper. The evaluation that the financial world made, it as that the NGOs were not subject of credit because of their non-profit character. Avina had legal restrictions to grant loans–this kind of actions is not included in their articles of association. It was also evaluated that this kind of instrument was not the “business” of Avina, and finally it came up a series of operational and tax complications proper of an organization which its main activity is not to give financial services.
At the end of 2007, Avina and Contigo suggested the design of an instrument to have access to financing made by Contigo with the Avina Foundation support. The design of the Fund constitution process was in charge of Fundación Contigo, a specialized organization on micro-credit delivery with experience on the development of financial instruments. Contigo both had to seek ways to present the NGOs’ needs and to suggest the constitution process of rules which would consider the leader partners concerns. During March 2008 it was held a meeting between Chile’s NGOs, where they gave shape to the Fund’s rules. They established each of every rule that would be in force after the access and approval of credits that they would ask themselves. The official launch was in July and the first credit was granted in August.

Please provide a personal bio of the social innovator behind this initiative. - Note this may be used in Changemakers marketing material. Please upload a photo of the project innovator or innovation at the bottom of the page. Raúl Perry, CEO of Fundación Avina, is 35 years old. He is Electrician Civil Engineer. His entire career has been developed in NGOs. He has an MBA and two certificates on micro-credit. Since 2000 he works at Fundación Contigo, a NGO devoted to micro-credit.

a) Please identify the individuals that your innovation benefits (Please check all that apply) - Producers, Consumers, Holders of assets

b) Do you help the people you serve to buy goods or services using financial innovation? If so, how? - The access to credit for NGOs allows them to use resources for buying goods or services.

c) Do you help the people you serve to sell goods or services using financial innovation? If so, how? -

The access to credit for NGOs allows them to use resources to implement, develop or improve their goods or services sale’s platform.