MICROCAPITAL BRIEF: Huruma Loans $8m to Microfinance Institutions INSOTEC, FACES; Aiming to Increase Productivity of Farmers in Rural Ecuador

The Huruma Fund, an impact investment vehicle with commitments of EUR 120 million (USD 145 million), recently issued three-year loans to two microlenders in Ecuador: EUR 4 million (USD 4.8 million) to the Instituto de Investigaciones Socioeconómicas y Tecnológicas (INSOTEC); and EUR 3 million (USD 3.6 million) to Fundación de Apoyo Comunitario y Social del Ecuador (FACES).

In conjunction with the loans, INSOTEC and FACES will receive EU-funded technical assistance. FACES will use this to assist in risk management, technology, “development of an internal scoring system for farmers without a credit history, as well as training for customer and risk analysis teams.” The technical assistance plan for INSOTEC includes “digitalization of the full credit flow, favouring marketing of new products, interconnection among farmers and expansion of the network of rural agents.”

Founded in 1980, INSOTEC offers microinsurance, technical assistance, financial education and microcredit to Ecuadorian microentrepreneurs in the agricultural, trade, service and manufacturing industries. The loans carry annual interest rates of 21 percent to 29 percent. As of 2018, INSOTEC reported total assets of USD 58.4 million, a gross loan portfolio of USD 50.2 million, and 17,129 active borrowers. More recent data are not available.

Founded in 1991, FACES offers microcredit and non-financial services, such as business training, to microentrepreneurs in southern Ecuador. It specifically targets women and agricultural producers. FACES also serves people with disabilities and their families through a customized credit product and rehabilitation services. As of December 2019, FACES reported a credit portfolio of USD 46.8 million and 20,302 customers. FACES does not accept deposits.

Based in Spain, Huruma invests with the goal to “improve access to finance in rural areas and the financial supply to small or excluded farmers in Latin America, the Caribbean, Sub-Saharan Africa and Asia.” It is financed by the Spanish government’s Fondo para la Promoción del Desarrollo (FONPRODE), the EU’s European Commission (EC) and multiple private investors. Huruma is led by Compañia Española de Financiación del Desarrollo (COFIDES), a development finance institution controlled by the Spanish government. The fund is managed by Gawa Capital Partners, a Spain-based investment advisory company specializing in microfinance.

COFIDES is controlled by three entities of the Spanish government. Its other shareholders are three Spanish banks and the Development Bank of Latin America, which is based in Venezuela and is known by its Spanish acronym CAF. COFIDES manages funding from the EU, the UN Green Climate Fund and the following entities owned by the Spanish government: FONPRODE, Fondo para Inversiones en el Exterior (FIEX) and Fondo para Operaciones de Inversión en el Exterior de la Pequeña y Mediana Empresa (FONPYME). As of the close of its 2019 fiscal year, COFIDES managed assets totaling EUR 1.1 billion (USD 1.3 billion).

Gawa Capital Partners is an investment advisory company specializing in microfinance. It was founded in 2009 by Agustin Victoria and Luca Torre. Most of the firm’s investments range in size from EUR 1 million (USD 1.2 million) to EUR 3.5 million (USD 4.4 million). As of 2020, the four funds it advises, Gawa Microfinance Fund, Global Financial Inclusion Fund, Huruma and Magallanes Impacto Fondo de Inversión Libre hold aggregate assets valued at EUR 196 million (USD 237 million).

By Harriet Ritchie, Research Associate

Sources and Additional Resources

COFIDES press release
https://www.cofides.es/en/noticias/notas-de-prensa/huruma-fund-financed-european-commission-fonprode-and-private-investors

COFIDES homepage
https://www.cofides.es/

COFIDES profile on Huruma
https://www.cofides.es/en/our-work/success-stories/fondo-huruma

COFIDES profile on FONPRODE
https://www.cofides.es/en/financing/financial-instruments/fonprode

INSOTEC homepage
https://www.insotec-ec.com/

INSOTEC financial information
https://www.insotec-ec.com/media/attachments/2019/09/17/insotec—rating-financiero-resumen-may-19.pdf

FACES homepage
https://faces.org.ec/

FACES financial information
https://faces.org.ec/informacion-financiera/

Gawa Capital Partners homepage
https://www.gawacapital.com/

European Commission homepage
https://ec.europa.eu/