Rural Finance Fund of Albania

François de Cagny, International Relations Department, Crédit Mutuel (France)
E-mail: francois.cagny@creditmutuel3d.com

Outline of Presentation:

1. Crédit Mutuel CM : General information and statistics
   
2. Rural Finance Fund of Albania RFF : History and basic information
   
3. Implementation of the RFF 1992-1999
   i. Phase One (1992-1994)
   ii. Phase Two (1994-May 1999)
   
4. Conclusion : Key Factors for Success

Crédit Mutuel (CM)

Crédit Mutuel is a powerful decentralized group which is number five of the banking groups in France. It is the second largest cooperative bank in France and the first French "bancassureur". It is a three-tier organization which is based on the principle of subsidiarity.

Rural Finance Fund RRF

The RRF developed out of a World Bank microcredit project. It was created in September 1992 under the Albania Development Fund Authority. Crédit Mutuel was invited by the World Bank to assist in the rural credit component portion of the project. The main objectives the cooperation between the Rural Finance Fund and Crédit Mutuel are the transfer of know-how, knowledge and competence.

The objective of the project is: To assist the poorest areas of the country to develop through employment creation and strengthening of existing economic activities. To assist with private sector development To establish a decentralized financial system at village level. The main credit beneficiaries of the project are the inhabitants of the villages who do not have access to formal credit. Loans are granted to every village inhabitant based on the following criteria: Good reputation Prospects of generating income Material and technical possibilities for the implementation of the activity, The rural credit programme consisted in establishing a civil society structure in the village (a Village association) based on Albanian tradition; support and training in micro-credit and small business management; small loan disbursements in villages which would create gainful activities.

Area of Operation of the RFF (in grey)

Implementation of the RFF 1992-1999

1. Phase One: September 1992 - May 1999

The first part of Phase One of the programme focused on identifying the objectives of the project, principles for implementation, reviewed statutes and internal rules and determined what services for whom.

From 1994 to May 1999, the project began practical implementation, established principles for development and focused on human resource development and training.

During the Phase One a number of difficulties were encountered including:

• Uncertainty of the political environment
• Lack of legal framework and rules
• Local culture and practice
• Individual tradition
• Lack of reliable telephone
• Lack of information systems
• Difficulty in travelling between Tirana and the majority of districts and villages involved in the project (security, long travel time, etc)

2. Phase Two: June 1999 - 2004

Given the positive results and the increased demand for financial services in the rural areas, the World Bank in agreement with the Albanian Government approved a new project - the Rural Finance Fund or RFF. Its objective is to:

• establish savings and credit associations
• increase the number and geographic spread of associations
• provide training for all partners

It also will help establish a two tier organization - village based savings and credit associations with a second tier union of these associations.

RFF is led by a Board chaired by the Vice-Minister of Finance of Albania.

The savings and credit association system is expected to become progressively sustainable, covering its operational costs.

Successive steps to the implementation of the project are will be to create a rural finance fund, to turn the present village committee or board into ASF or create new ones in other areas. Also planned is assistance to create a national union of savings and credit associations in two years,

The programme has being implemented with the identification of the first villages where savings and credit association could be created.

Conclusion - Key Factors for Success

In the first phase (1992-mid 1993), the key factors identified for the success of the project were as follow:

• The project was in line with local culture
• Successful identification of leaders
• Building the project from bottom to top
• Implementation of the project on a network approach

In the second phase the key factors for success were:

• Time schedule respecting the existing capacities (human resources and tools) and the local economic environment
• Training the participants of the project on technique and technology i.e. banking activities in savings and credit cooperatives (human resources are at the core of success)
• Implementation of standardized technology adapted to the local technical environment.

In general, the follow factors must be considered for success:

• Determine objectives or goals that take into consideration the local economic environment
• Audit the project progress at regular intervals
• Ensure that local manager retain responsibility of the project
• Ensure that consultants bear in mind that their only objective role is to transfer their know-how to local staff.

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Updated: 20 November 1999