La Chuspa's fight for survival in the times of COVID-19

02-11-2020

La Chuspa-Mide is a Peruvian SACCO formed by rural families from the southern highlands, near the city of Cusco, 80% of its members are women.
Pandemic reality is harshly affecting SACCOs: strict lockdown, high prevalence of Covid19, contraction of 30% in the GDP during the second quarter of 2020 and new regulatory measures for financial institutions. 
La Chuspa faces a double risk, the reduction in the collection of the debts from partners who now see a contraction in their incomes as well as the reduction on funds placement. 

On March 15, the Peruvian government declared a state of emergency and imposed a mandatory quarantine in the country to face the inminent thread of COVID-19. All productive and commercial activities were paralyzed, meetings and assemblies were forbidden, public transportation was restricted and private transportation prohibited, there was a even a curefew in place. After several lockdown extensions, which was still in place until September 31st, the government announced a plan to gradually reopen the country and established new safety and security requirements for productive and financial businesses.

Savings and Credit Cooperative Organisations (SACCOs) have been one of the sectors with the highest liabilities due to movement restriction measures and economic deceleration. La Chuspa-Mide is a Peruvian SACCO not immune to these problems, its partners belong to rural families from the southern highlands near Cusco city and 80% are women. Main economic activities among members and its families inlcude: production and trade of artisanal handicrafts for tourists, construction day labour and transportation of agricultural and livestock products to different local fairs and the city of Cusco. The paralysis of tourism and construction, as well as the prohibition of transportation between provinces strongly deteriorated members income. 

Additionally to economic depression in the area, due to fear of contagion, some rural communities did not allow the entrance of dwellers from neighbouring localities. Communities would only receive returning relatives from Lima and other Peruvian regions, some returned unknowingly carrying the coronavirus and spreading it. This increased even more the sense of menance posed by aliens to communities. For La Chuspa workers it was almost impossible to move from one community to the other renegotiating debts, asking for installements or placing new credits. 

From mid March until the end of April, the cooperative had to close all offices. On May they began assisting their members little by little and were fully operational in August. In this context, the organisation saw its income reduced both from placements and from loan recovery. The government agency in charge of regulating and supervising financial institutions, Superintendencia de Banca y Seguros (SBS), issued new regulatory measures to protect individual citizens in debt, enforcing a 6 month period of interest free instalments. La Chuspa is following this emergency procedure, which in turn impacts even more on its income.

To cope with this new financial frailty originated by Covid-19, La Chuspa, with the support of Agriterra and an expert Agripool assigned to the task, designed a contingency plan to allow for the continuity of the organisation's operations. The goal is to reduce their expenses in 49% by the end of the year. They have already cut expenses in 31% by lowering its payroll, hopefully just for a few months, and reducing other operating expenses such as travels.

Furthermore, Agriterra is advising La Chuspa on various topics through specific missions in charge of experts: health protocols to minimize Covid-19 contagion among staff and members, scenario planning to attract new loans from financiers, timely payment plan to creditors to built trust and credibility and a staff training plan. The latter covers topics such as risk assessment, quality management and processes in the middle of Covid-19 pandemic, loan collections in pandemic periods, forms of work, organisational and salary structure, and from manager to coach leader: the role of senior management in the Covid-19 crisis.
 
The Peruvian government, throught it agency SBS, imposed additional procedures and management of indicators for financial institutions, increasing pressure on SACCOs reporting systems. In line with the advisory mission to comply with all new regulatory procedures, we have supported them by investing in basic technology: new server to keep information safe, development of software to produce monthly financial reports accordingly to SBS requirements and zoom licenses so the staff can hold meetings online without being limited by the free 30 minutes offered by zoom. All these services have been accompanied by the permanent advice of an Agripool expert and Agriterra’s business advisor to measure the cooperative’s finantial evolution and present situation, as well as to support decision making of management and directors.

Currently, they are negotiating a loan with Rabobank. Staff is committed to learning and following training activities. The organisation complies with all SBS information and requirements and fund recovery is slowly taking place.

Although it will be necessary to do a final evaluation and it is expected that the financial results at the end of the year will not be entirely encouraging, we are sure that the best decisions have been made in a timely manner to try to mitigate the impact of the pandemic on this organisation. The challenge is still big and it will surely take more time and efforts to recover to the pre-Covid19 level but at least we are sure that the foundations are being laid for this to happen.

 


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