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Evaluating Agricultural Microcredit

Lending within Asociacin Mangle:

An Assessment of Product Cost Structure and
Molly Hubbard, Sarah Kotb and Morgan Rogge
Team El Salvador 8: January 2014

Photo credit: Sarah Kotb

Series Editor: Adele Negro, Program


We would like to express our gratitude to all who helped and supported us throughout this project. We would
like to thank all of those involved in the planning, organization, and execution of this project, as well as all
of the community members who participated in the interviews we conducted. The time, interest, openness,
and attention to detail by all of those we interviewed allowed us to gather valuable data that would not have
been obtained if not for the time and consideration of these producers.
We would also like to extend a special thanks to Juan Luna, Amilcar Cruz, and Jos Maria Argueta for
sharing their knowledge and for connecting us with local communities and all of those whom we
interviewed: Humberto Rosa, Carlos Quintana, Antonio Amaya, Porfirio Belloso, Leonidas Monteagudo,
Santiago Rajo, Carmen Argueta, Luis Ramos, Ricardo Antonio Olivo, Miguel Angel Bonillas, Antonio Rivera
Rivera, Victor Giovani Lopez, Elmer Alfred Chavez Diaz, Francisco Daniel Alvonso Acevedo, and Walter
Alexander Daz. Their efforts to provide information and transportation were invaluable in making this
project a reality. We are very grateful for the support and accommodation of the entire Coordinadora staff,
as well as of our host families, who were also extremely accommodating and ensured that our stay was
comfortable and filled with delicious food. Last, but certainly not least, we would like to thank the rest of
Team El Salvador 8 and Adele Negro for their unwavering support throughout the project.

Executive Summary
January 2014 marks the eighth year of Team Montereys collaboration with the NGO Asociacin Mangle and
its grassroots organization La Coordinadora on a number of community development projects deemed to be
of high importance to furthering the organizations social mission.
Between January 7th and January 24th, the Microcredit Team worked on the ground in El Salvador to
examine Asociacin Mangles current agricultural microfinance program and elaborate a document of best
practices for loan administration, as well as a preliminary cost structure for a lending program. As a result of
this dual objective, the following report is divided into two distinct parts. Part I describes best practices for
microcredit lending in the black bean program and includes recommendations for achieving these, while Part
II accounts for the cost of the black bean program with the use of a preliminary income statement and
activity cost structure. The Team focused particularly on the black bean and hybrid corn production
programs, due to the guaranteed markets within these sectors, as well as to the promise of continued funding
for these programs.
In order to produce the best practices manual and create the income statement and cost structures, the
Microcredit Team started with a literature review of best practices regarding agricultural microfinance and
budgeting before arriving in El Salvador. In country, the team conducted interviews with both the producers
receiving loans and the loan administration team of Asociacin Mangle. The interviews aimed to assess
where Mangles program currently stands in terms of upholding its social mission in support of the producers
and the community of the Bajo Lempa, as well as the financial and administrative sustainability of the
program for the future.
This final report reveals that, for the most part, Asociacin Mangle is successfully addressing its social
mission by providing good support to producers. However, the programs future ability to fulfill this social
mission is threatened by its lack of financially sustainable business practices. Low interest rates, lack of
coverage of administrative and indirect costs, and few consequences for defaulters indicate that the design of
the program must be improved to ensure financial viability.


1.0 Introduction
As a community-based sustainable development organization, Asociacin Mangle has been involved in
agricultural microfinance for many years, working to support producers for whom self-financed production is
unrealistic, and access to traditional credit is limited. This microcredit program currently has six lines of
credit within the agricultural sector, financed primarily through an annual loan portfolio of $150,000. Under
these lines of credit, Asociacin Mangle provides small loans to producers, ranging in size from several
hundred dollars to several thousand. A share of each loan is apportioned in the form of any inputs necessary
for a cycle of production (seed, fertilizer, pesticides, etc.), purchased in bulk by the organization below
market value, while the remainder of the credit is given to borrowers in the form of a check to cover labor
and machinery costs. This report examines the credit line for the production of black beans, as well as the
costs associated with the production of hybrid corn (see Background for further details).
Within the black bean program, members of Team El Salvador 8 were asked to investigate loan
administration practices and produce an operational manual of policies and procedures for the successful
administration and use of microcredit loans. This manual is based primarily on a literature review of best
practices and policies for microcredit institutions with similar characteristics, operating in comparable
environments. In addition to the literature review, we conducted interviews with loan administrators,
agronomists, and producers to assess current lending practices in comparison with best practices. Based on
this information, we have made recommendations to improve the lending practices and policies of Mangle
and move toward best practices.
We examine best practices from both the social lens and the programmatic sustainability lens, the former
with a greater focus on improving the quality of services rendered to borrowers; the latter with a greater
focus on building profits for the lending institution. As such, in the following report, best practices have been
separated into two categories: Maintaining Mangles Social Mission and Ensuring Programmatic
Sustainability. Each of these sections contains subsections in which the best practice is defined, the policies
and practices as they currently exist are evaluated, and the associated recommendations to approach best
practices are laid out. While this report is based on primary research on production within the black bean and
hybrid corn programs, it was designed to ensure that the majority of practices and recommendations could be
applied to future lines of credit. This is particularly pertinent as Mangle redesigns the organizational structure
of its microcredit system as a new institution called Xinachtli.
Mangles envisions Xinachtli, which means seed in, Nahuat, the indigenous language of El Salvador, as a
new arm of the association, separated from its mother organization but under the same system of governance.
This institution would manage all the lines of credit currently administered by Mangle, with the objective of
eventually becoming a for-profit microfinance organization. Therefore, the primary purpose of this report is
to help strengthen the administrative system of Mangles microcredit program under Xinachtli, in order to
improve its programmatic sustainability and ensure adequate profit margins for both Xinachtli and associated
producers. Simultaneously, this report seeks to ensure that Xinachtli can remain committed to the social
mission of Mangle, and to its priority of supporting the needs and livelihoods of community members.

1.1 Background
This year Team El Salvador 8 was asked to investigate two programs within the Granos Bsicos (basic
grains) sector, specifically those of hybrid corn and black beans. While the black bean program follows a
traditional agricultural microfinance model, distributing small loans to producers during each production
cycle, the hybrid corn production program is no longer considered part of the microfinance system (as we
explain below). The production programs for black beans and hybrid corn are unique among those in
Mangles system for a variety of reasons.
The governments hybrid corn seed program contracts out the production of hybrid corn seed to local
producers, who then sell their product back to the government for distribution to Salvadoran families. The
distribution of hybrid seed packets to families is meant to ensure that small-scale growers have the greatest
chance at success when cultivating corn for family consumption. The production of the seed for these
packets, therefore, is of great importance to the government, both to ensure adequate sustenance for the lowincome rural population, and to reduce reliance on foreign agricultural biotechnology corporations such as
However, a recent change in national regulation, with the goal of maintaining greater control of seed quality
during corn production, now prevents small farmers in Mangles microcredit program from producing hybrid
corn seed. Instead, Mangle holds a government contract to produce the corn seed internally for sale back to
the government. Under this contract, Mangle, with the help of agricultural experts and government
consultants, is in charge of the entire production process, from land preparation to processing and packaging
the seed. Mangle manages two parcels of land for production of hybrid seed, totaling 22 manzanas,
approximately 54 acres. While the production of corn seed is labor and resource-intensive, it is attractive
because the sale of the seed back to the government is guaranteed, as long as the seed meets quality
requirements. The production of the seed, including initial inputs, is financed primarily with loans from
ALBA (Alianza Bolivariana para los Pueblos de Nuestra Amrica), a Central and South American trade
Black beans, on the other hand, have not been produced in the Lower Lempa region in the past. Rather, small
farmers grow several varieties of red beans. However, under an agreement with ALBA, Mangle is supporting
local producers in their efforts to grow this crop for guaranteed sale on the Venezuelan market. As in the
hybrid corn seed production program, the guaranteed sale of any black bean production output adds to the
appeal of growing this unproven crop. Under the agreement with ALBA, Mangle receives a loan from the
trade organization to finance production efforts using microcredit loans. In its first year, Venezuela will
purchase all black beans produced at a price of $39/quintal ($39/220 pounds), and this value will increase
accordingly if the Venezuelan market price for black beans increases. In the case of a price increase, ALBA
will meet the market price, and transfer the additional funds to Mangle for distribution back to producers.
It is important to note that the technical expert employed by Mangle for the black bean program, Porfirio
Belloso, also provides technical support to producers within two other community development
organizations, OIKOS and COMUS. Asociacin Mangle lends a portion of the capital borrowed from ALBA
to these organizations at the same interest rate; these organizations in turn are responsible for disbursing and
managing individual loans to producers, and ensuring that Mangle receives repayment.

1.2 Methodology
Prior to Team El Salvadors arrival in the Bajo Lempa, the Microcredit Team conducted preliminary research
of literature and submitted a project proposal to the board of Asociacin Mangle for review. While still in the
United States, the had an initial discussion regarding the merits of this proposal via Skype with the teams
board liaisons, Jos Amilcar Cruz, the Production Program representative, and Juan Luna, Mangles chief
agronomist and Production Program Coordinator. After arriving in country, the team met with Juan Luna and
Amilcar Cruz in person to finalize the project proposal. In this meeting the methodologies and deliverables
of the project were more clearly laid out, and a work schedule for the weeks that followed was created.
Throughout the three weeks in country, between January 7, 2014 and January 24, 2014, the Microcredit Team
conducted both qualitative and quantitative research, using three main methodologies: a series of semistructured interviews, the review of documents related to the distribution and repayment of loans, and direct
observation at both Mangle offices and producer sites in order to further understand practices, policies, and
attitudes. With the help of Juan Luna, Jos Maria Argueta Pineda (the main liaison between Mangle and El
Salvador 8), and Porfirio Belloso, Mangles extension agent, interviews were scheduled with the board of
directors, loan administrators, accountants, technical assistants, and producers (see Appendix 2).
In the days before the first interview, the team developed a series of interview questions: 54 questions
(Appendix 1a) were created for the loan administrators, 41 questions (Appendix 1b) for the technical
assistants, and 38 questions (Appendix 1c, Appendix 1d) for the producers. These questions were aimed at
gathering both qualitative and quantitative data from each of these groups regarding their experiences within
the microcredit program. The open-ended interview questions were developed in order to obtain in-depth,
unbiased responses with respect to some of the impacts of the microcredit system that had not previously
been considered or that were incidental effects or externalities. The team opted for semi-structured interviews
in order to allow the interviewees to answer the questions freely and foster an open conversation regarding
their experiences.
In all, the team conducted interviews with two accountants, nine producers, two agronomists, and four
administrators. In addition to the research on relevant literature regarding microcredit programs and best
practices associated with them, the Microcredit team was able to procure important loan documents with the
help of Humberto Rosa, a loan administrator and accountant at Mangle, including a sample contract, a letter
of exchange, a copy of the Rules and Regulations for Microcredit Lending in Agriculture (Reglamento de
Crdito Agropecuario), and a ledger of the black bean loans administered to date.

1.3 Project Scope

The research conducted for the purpose of producing this operating manual examines the agricultural
microcredit program provided by Asocacin Mangle in the area of the Bajo Lempa, El Salvador. The manual
covers the basic grains sector and is based upon fieldwork regarding the hybrid corn and the black bean
program. However, more emphasis has been given to the black bean program, due to both its novelty and its
different nature from that of the hybrid corn program, where producers work under Mangle instead of
receiving microcredit loans for production.

During the time of the fieldwork and as of the writing of this report, the first harvest cycle for black beans
has not yet been completed. This has imposed many limitations on the research process. Specific numbers for
earnings and repayment rates could not be examined and only projected ideas with respect to profit margins
could be requested.
All the producers involved in the research have received loans from Asociacin Mangle, but none from its
partner organizations, OIKOS or COMUS, as they operate in different regions of El Salvador. The interviews
conducted with loan administrators have also been limited to personnel working within Asociacin Mangle.

1.4 Interview Summaries

1.4.1 Technical Experts
Porfirio Belloso:
The interview with Porfirio Belloso, a technical expert for Mangles black bean program, took place on the
land Mangle leases for hybrid corn production. Porfirio clearly laid out his role from start to finish of the
production cycle. As the extension agent for the black bean program, Porfirio works with 200 producers
farming on nearly 180 manzanas of land; of these producers, 50 are members of Mangles microfinance
program, 100 produce under OIKOS, and 50 produce under COMUS. Porfirio explained that he is extremely
busy with all of these producers and that he tries to visit them every fifteen days, if possible, and often
consults with producers over the phone. As an agricultural expert, Porfirio explained that he does not have
much involvement with the administration of loans, and that meetings more often occur between the head of
the production sector, Amilcar Cruz, and Mangles Board of Directors. Porfirio stated that he thinks the
greatest challenge for the production of beans is the transition from conventional to organic agricultural
practices, as well as the risk of natural phenomena, including disease, drought, flooding, and other changes in
weather affecting production. When asked for recommendations to improve the efficiency of the microcredit
program, Porfirio expressed a desire for increased contact between accountants and technical experts; the
creation of a separate sector within Mangle for the micro-lending program would be beneficial.

Leonidas Monteagudo:
The interview with agronomist Leonidas Monteagudo took place at Mangles offices in San Nicolas on
January 13, 2014. Leonidas works as Mangles technical expert, specializing in the hybrid corn program.
Leonidas was extremely clear in his description of the various costs associated with each phase of production
for the hybrid corn microcredit program. These costs include, but are not limited to: preparing the soil;
finding water sources; sowing the land; installing and operating irrigation systems when necessary; applying
fertilizers, insecticides and herbicides; cross-fertilizing the male and female reproductive plants; harvesting
the crop; selecting quality seeds; and transporting, processing, and packaging the seeds. In the summer
months the total cost per manzana is approximately $3,000, and during the winter it is approximately $1,500,
due to differences in the moisture of the soil. As a technical expert, Leonidass role requires him to visit the
producers frequently in order to assess the suitability of the land, check for plant infections, monitor the
plants development, explain the technical aspects of production to workers and producers, and monitor how
these recommendations are followed. With the recent changes in policy, Mangle can no longer disburse

micro loans for the production of hybrid corn, but rather must itself cultivate the corn. Mangle is currently
cultivating 22 manzanas of land for the hybrid corn seeds. Antonio Amaya produces twelve of these
manzanas, and another producer known as Johnny produces ten. In previous years, when Mangle did
disburse micro loans to individual producers to farm hybrid corn seeds, there were approximately 25 corn
seed producers under its management.

1.4.2 Loan Administrators

Humberto Rosa and Carlos Quintana:
The interview with the loan administrators and Mangle accountants Humberto Rosa (Chepe) and Carlos
Quintana took place at Mangles offices in San Nicolas on January 7, 2014. Throughout the interview it
became clear that, although these two accountants work with the microcredit program, it is not their only
responsibility within Mangle. Furthermore, the two accountants explained that they do not participate
extensively in the full process of administering loans, but rather handle paperwork, such as contracts, and
disburse checks. The accountants explained that none of the administrative costs required for the processing
of the loans are internalized and, further, that Mangles Board of Directors decides the interest rate without
the participation of the accountants. The accountants explained that a fee for administrative costs is not
currently being assessed because it would raise the costs to producers significantly, which would not be in
keeping with Mangles social mission. When asked how long, in terms of hours, it took to administer a loan;
the accountants were unable to say. They explained that they were unsure how much time they spend on any
one loan because they are often interrupted and asked to start a new task or project, and because they are
involved in so many different aspects of Mangles accounting. Both accountants expressed concern with this
method and commented on the lack of organization and the inefficiency this causes. The accountants
explained that they would like to have more clear communication with the Board of Directors, and more
personnel to assist them; however, they admitted that this was not possible because Mangle does not
currently have sufficient funds to hire more employees.

1.4.3 Black Bean Producers

Victor Giovanni Lopez Bontle, Elmer Alfredo Chavez Diaz, Fransisco Daniel Alfonso Acevedo,
Walter Alexander Diaz, Ricardo Antonio Olivo, Miguel Angel Bonillas, Antonio Rivera
Rivera, and Santiago Rajo:
Eight black bean producers were interviewed for the purpose of analyzing Mangles lending service. Seven
of these were interviewed in the area of Salinas del Potrero: Victor Giovanni Lopez Bontle, Elmer Alfredo
Chavez Diaz, Fransisco Daniel Alfonso Acevedo, Walter Alexander Diaz, Ricardo Antonio Olivo, Miguel
Angel Bonillas. Santiago Rajo was interviewed in the community of El Mono.
All eight producers currently receive loans from Mangle. This is the first time that three of these producers
have worked with Mangle. All eight producers learned about the black bean program by attending
information sessions with Porfirio Belloso and the Production Program Director, Juan Luna.
First, Porfirio Belloso visits the producers who are requesting a loan in order to determine the size of the
land, assess the producers ability to produce adequate yield, and determine whether the land was appropriate

for the crop. After meeting with Porfirio, the producer, if deemed appropriate for the program, presents his
ID and signs a contract. Based on the size and characteristics of the land, Porfirio determines the amount of
inputs, including seed, fertilizers, and pesticides, that the producer requires for the cycle of production, and
orders these from suppliers along with the inputs needed by all other producers in the program. Eight days
later, the producers receive these inputs as well as a check for labor and land preparation costs. No other
documentation is needed to receive the loan.
The land cultivated by each farmer ranges from one half of a manzana to three manzanas, and four of the
eight producers own their own land. Most of the producers would expect an average of 20-30 quintales of
black beans per manzana in a good harvest. However, given the newness of the program, the real harvest is
expected to be much lower (between 6-7 quintales). For every manzana of production, Mangle provides a
loan with a total value of $600, including inputs and cash provided for labor and machinery.
Before participating in the black bean program, half of the producers engaged in other agricultural activities
with crops such as red beans and corn. Three out of the eight bean producers have previously received loans
from Mangle within the basic grains sector, for corn or red bean production. Two other producers received
loans for shrimp farming. Even while cultivating beans for the black bean program, however, the majority of
these producers earn income from other activities to sustain their livelihoods. Three producers earn their
current income from fishing, while three others cultivate other crops. If they were able to save part of their
income, the majority of these producers indicated they would use the savings for investment purposes, such
as acquiring more land or more animals. One producer expressed the need for a greater income in order to
provide better nutrition and better health care for his family.
The producers responses varied when questioned about the interest rate they pay on their loans from
Mangle. Four producers mentioned a 4% interest rate, while the other four claimed an interest rate of 6%.
This discrepancy aside, most producers confirmed that Mangles loan terms are much easier than those of
conventional banks, with no collateral requirements or processing fees. In addition, producers receive free
technical assistance and more flexible repayment rates in case of harvest failure. For example, one producer
mentioned that when a previous harvest failed because of a storm, a conventional bank, from which he had
taken out a loan, failed to send any representatives to confirm that his harvest had been affected by the storm.
The technical assistance provided by Mangle takes the form of regular visits or phone calls by Porfirio. As
the technical expert, Porfirio consults with the producers individually and gives each one specific
recommendation to help him achieve success, such as a table of exact dates to apply pesticides, and the
quantity to apply. Porfirio is also available in case of emergencies, such as the appearance of a plant disease.
There are many challenges facing the lending program, according to the producers. Infrastructural problems
caused by winter floods, for example, discourage engagement in agriculture. Before the civil war, there were
channels that directed the floodwater. During the war, however, they were not maintained, a situation that
now compromises both agricultural and daily activities. There are also many health problems that result from
storm flooding. Moreover, the roads are in disrepair and must be fixed to improve market access.
Mangle could make a number of improvements to better serve producers, as recommended by the black bean
farmers interviewed. For example, Mangle should attempt to improve farm infrastructure, either by providing
small loans to producers for this purpose or by networking with other organizations such as ALBA with

greater resources to deal with infrastructural problems. In particular, a better drainage system is desperately
needed. Finally, several producers mentioned that the cost of renting land for cultivation can be high, and this
cost should be taken into account when determining loan size.

1.5 Best Practices: Maintaining Mangles Social Mission

Although Mangle now hopes to expand its micro lending into a more lucrative (for-profit) financial
institution, the following six best practices have been selected to ensure that Mangle continues to adhere
to its social mission of providing an accessible lending service to local producers and improving their
economic welfare. In addition to the definition of each best practice, the Microcredit Teams evaluation
of Mangles performance in this regard will be set forth, followed by our recommendations, as laid out

1.5.1 Communication and Transparency

Definition of Practice:
According to Evers et. al (2000), the microfinance institution should facilitate clear communication and
transparency between the client and personnel in terms of lending procedures, loan terms and options, as
well as borrowers rights and responsibilities. This transparency is crucial to the success of any
microfinance institution since it contributes to establishing trust between the community and the
organization. It is then also noteworthy that transparency is key not only to Mangles social mission but
also to its programmatic sustainability, an aspect easily threatened by the lack of trust. Furthermore, in
line with Mangles objective to act in accordance with the double bottom line, Guntz (2011) presents
client protection through transparency in interest rate pricing as imperative to supporting an
organizations social mission.

Evaluation of Practice: Unsuccessful

Through interviews with eight producers participating in the black bean program, we found a strong
discrepancy between the clients understanding of the loan terms and the reality. Four out of the eight
producers interviewed stated that the interest rate charged on their loan was 4%. The other four
producers believed that their interest rate was 6%. Furthermore, the two accountants interviewed stated
that the interest rate for these programs was 8%. According to the Mangle Board of Directors, which is
the overseeing body of the organization, all those interviewed were incorrect: the interest rate on the
black bean program is 7%. Communication and transparency both between the producers participating
in the microcredit programs and with Mangle administrators was therefore found to be extremely



On the basis of this research, it is recommended that Mangle increase and improve engagement with
producers to ensure that they fully understand the terms of their loans, and in turn their obligations to
Mangle as participants in this program. It is further recommended that in all meetings and conversations
between borrowers and Mangles personnel prior to the loan disbursal, the terms of the loan be reiterated
and clarified until it is certain that all parties understand. This disparity in information is potentially
detrimental to Mangles ability to support local communities. Strengthening organizational transparency
and communication between producers and administration by confirming producer understanding of all
loan terms, including interest rates, will ensure that Mangle comprehensively adheres to its social
mission. Moreover, Mangles access to and influence on its constituent communities is largely supported
by the trustworthy reputation that the organization has built steadily throughout its years of operation.
Any misunderstanding that leads to borrowers suspecting an infringement of their rights is a potential
threat to this trustworthiness and, ultimately, to Mangles social mission.

1.5.2 Financial Planning and Financial Follow-Through

Definition of Practice:
Most of the existing literature on micro financing strongly points to the importance of ensuring longterm financial planning mechanisms for the loan recipients (IFAD 2006a, IFAD 2006b, Miller 2011,
Waheed and Hamid 2002, and Brau and Woller 2004). This is dictated by the dangers inherent in
developing dependency on the lending program. Both group savings plans through cooperatives and
individual savings programs have the potential to reduce producer dependence on micro financing
programs and spur long-term economic self-sufficiency. Savings plans take many forms: they can
include, for example, a requirement that the beneficiary save 20% of the loan value and lend this amount
along with an additional voluntary savings deposit to needy individuals at a low interest rate, thus
generating profit while promoting future self-sufficiency (Karlan 2007). In addition, micro-lending
institutions are now venturing even further, providing insurance and business education to their
borrowers (Brau and Woller 2004). These additional offerings increase borrower understanding of
policies and practices and, although at first this educational initiative often meets resistance, it has been
found to be welcomed eventually, contributing to increased self-sufficiency, trust and transparency. In
fact, the study by Brau and Woller (2004) confirms that the number of savers greatly exceeded the
number of borrowers when both loans and savings plans were offered by microfinance institutions
(MFIs). This being said, however, such initiatives are limited in their effectiveness by their costliness.
Moreover, literature that proposes such initiatives does not consider the financial intricacies of
agricultural lending.

Evaluation of Practice: Unsuccessful

Throughout this study, it was found that not one of the nine producers interviewed participated in a
savings program. Furthermore, within this pilot year of the black bean program many of the producers
did not expect to receive much, if any, income from their participation in the program.


In order to improve the financial planning and follow-through that Mangle provides to its producers, it is
recommended that the creation of Xinatchli be accompanied by the requirement that producers
participate in either group or individual savings programs associated with cooperative or individual
lending programs respectively. In recognition of the fact that Mangle itself is not a financial institution,
and therefore is not capable of managing these savings accounts on its own, it is recommended that
Mangle partner with local banks in order to streamline this process. The implementation of these savings
programs will enable both individual producers and cooperatives to reduce dependence on lending
institutions, and, in turn, increase the efficiency of the lending institutions by eliminating the disparit y
between funds and target groups. Eventually, this efficiency will work to achieve Mangles social
mission of improving the welfare of the community in Bajo Lempa.

1.5.3 Technical Assistance and Support

Definition of Practice
In order to minimize credit risk, non-financial services, including training and technical assistance, are
considered necessary practices in agricultural lending by a number of policy experts. (IFAD 2006,
FARM 2007, Guntz 2011). According to IFAD (2006), direct technical support to producers from
lending organizations can improve agricultural yield and product quality, which ensures better chances
at the market and hence improves repayment rates.

Evaluation of Practice: Successful

The study of Mangles procedures has revealed the execution of thorough technical assistance
throughout the agricultural season. The support takes place in the form of regular monitoring visits by
the extension agent, Perfirio Belloso, as well as additional support in the event of any unexpected
problems such as the spread of a crop pest. In that regard, Mangle is approaching what would be
considered best practices. Although technical follow-up is costly, it also provides security to the
institution by helping to guarantee a minimum yield, and thereby ensuring repayment rates are

In order to reduce the costs of providing technical assistance, Mangle should undertake an investigation
of the costs and benefits of contracting out technical work to extension agents who have easier access to
producers located in hard-to-reach areas. We also recommend that Mangle provide further training to
producers so that they can monitor and assess the health of their crops, and effectively confront certain
production problems on their own, in order to reduce the number of visits by the expert.

1.5.4 Suitability of Loans to Agricultural Needs


Definition of Practice:
Agriculture is widely recognized as a risky area of investment, due to the vulnerability of repayment
rates caused by a range of unknowns such as weather, pests, and disease. A 2006 International Fund for
Agricultural Development (IFAD) Occasional Paper, in a series of 2006 IFAD case studies, and Miller
(2011) discuss key factors of successful microfinance lending that are specific to the agricultural sector
and address this vulnerability. These include a comprehensive consideration of household income to
design a loan, the reliance on both character and technical assessments for lending; maintenance of a
diversified risk portfolio; the provision of a complete package of inputs; and accommodating loan terms
and conditions.

Evaluation of Practice: Partially Successful

As part of the effort to help ensure the suitability of loans for agricultural needs, the five sub-practices
mentioned in the previous paragraph were assessed. In interviews with loan administrators and
producers, it was found that although Mangle was following four of these best practices--a diversified
risk portfolio, the provision of a complete package of inputs, reliance on both character and technicalbased assessments for loan applicants, and accommodating loan terms and conditions--it lacked one
important practice: a comprehensive evaluation of household income to assess loan applicants.

In order to improve the suitability of Mangle loans to agricultural needs, we recommend that Mangle
take into account the total income of an applicants household rather than the income as a result of
production when considering repayment options, especially because many producers have multiple
sources of income, including remittances, livestock and small businesses. Furthermore, while the
suitability of the cultivated land and the producers technical capabilities are taken into consideration
within the black bean and hybrid corn programs, in most lines of credit loans were found to be
distributed on the basis of character recommendations alone, without taking into account technical
experience or knowledge. Therefore, we recommend that Mangle require applicants in all credit lines to
pass both technical and character-based assessments before being accepted to the loan program.

1.5.5 Promoting Access to Markets

Definition of Practice:
Facilitating access to markets for agricultural producers is a means by which microfinance institutions can
work to maximize the success of agricultural lending efforts. Guaranteed market access ensures that
producers can generate an income through the sale of their products, which in turn acts as a mechanism for
improved repayment rates as well as improved livelihood for the farmer. Lending institutions must carefully
consider the quality of the market, including such aspects as price volatility, seasonal demand, the prevalence
of intermediary traders, and storage and processing channels. Carefully assessing the features of the market
of each lending sector, and finding partners that can guarantee markets, mitigate market risks, and facilitate
transportation, processing and storage should be key objectives of any microfinance institution (FARM,


Evaluation of Practice: Partially Successful

Within the black bean microfinance program, Mangle has successfully guaranteed market access for
producers through its partnership with ALBA. Through this relationship bean producers are able to sell their
full production of beans at $39/quintal, a price significantly higher than the open market price in both El
Salvador and Venezuela. This relationship is unique, and not all production sectors within Mangles
microcredit program have access to such assured markets. According to bean producers who received loans
from Mangle prior to participating in the black bean program, low prices and the reliance on intermediaries,
or coyotes, represented a significant impediment to the realization of full returns on their loans.

We recommend that Mangle design a procedure for assessing the market strength of products within current
and potential credit lines, based on a number of indicators such as those outlined above (price volatility,
seasonal demand, intermediaries, transportation, processing, and storage channels). In addition, Mangle
should work to establish and maintain strong portfolio quality and employ marketing tactics that attract
further partnerships with institutions with the ability to offer guaranteed markets, secure processing, and
distribution channels. In forging partnerships, Mangle should take into consideration the need to insulate its
microcredit program from political interference; according to CGAP (2006), government intervention is one
of the largest sources of risk in agricultural lending.

1.6 Best Practices: Ensuring Programmatic Sustainability

While the social mission motivates most of Mangles work, the sustainability of the organization, and in
particular the sustainability of its microcredit program, cannot be ignored. Furthermore, programmatic
sustainability is key to the long-term effectiveness of Mangles programs. Mangle must find a balance
between providing strong, accessible lending services to the producer at present, and ensuring the availability
of these services in the future. Many studies in fact show that one of the reasons why present access to
microcredit is at times limited is the, lack of self-sustainability [Stiglitz (1990); Yunus (1999) and
McNamara and Morse (1998)] (Waheed).

1.6.1 Improvement of Repayment Rates

Definition of Practice:
In order to ensure the sustainability of the lending program, improving repayment rates is crucial. The ability
to increase the number of loans disbursed is largely dependent on the liquidity and availability of funds
within the micro-financing institution. If its borrowers are not repaying the micro-lending institution, the
institution will be unable to finance new loans into the future. If, as we have seen with Mangle and ALBA, a
microfinance institution seeks outside sources for funding and cannot repay its creditors because of low
repayment rates among its own borrowers, the institution faces a great deal of difficulty: the institution will
be expected to adhere to any procedures agreed upon for unpaid loans or pay with funds devoted to other

Evaluation of Practice: Unsuccessful

Mangle is currently suffering extremely low repayment rates of around 10%. These low rates represent the

current unsustainable nature of the lending program. Many factors contribute to this alarming rate: character
assessment of loan applicants is not accompanied by an assessment of individual financial capacity to repay
the loan; no collateral requirements are imposed and repayment of loan is based on the success of the
harvest. In case of harvest failure, the producer is given the option of being refinanced with no consideration
of the potential repayment capacity through other sources of income.
With low repayment rates, Mangle must finance the unpaid loans with funds previously devoted to other
activities. This complicates the financial structure of Asociacin Mangle, and it limits the possibilities of
pursuing other non-microcredit services offered by the organization. The creation of Xinachtli and thus the
separation between Mangle and the micro lending program, continual refinancing from Mangle would not be

To improve repayment rates, stricter requirements to obtain a loan, as well as stricter procedures in case of
default are to be encouraged.
First of all, we recommend a more comprehensive financial assessment of a loan applicants ability to repay.
The assessment should consider non-agricultural sources of income. Most agricultural producers have
multiple sources of income due to the cyclical nature of agriculture that does not afford a constant income
spread throughout the year (IFAD 2006). Five out of nine producers interviewed revealed other sources of
income accounted for by the possession of livestock, fishing activity practiced by parents, or remittances
from family members abroad. By recognizing the loan applicant as a member of an economic unit with many
sources of income, Mangle can achieve a better assessment of repayment capacity. According to the IFAD
report, successful agricultural lenders disseminate the clear message that repayment is not linked to the
success of the crop.
Many studies also show that successful microfinance institutions have collateral requirements. Such
requirements suitable for rural and agricultural lending do not rely on land or property but rather on
combinations of personal guarantors and pledges on household and enterprise assets (including titled land
and animals), (IFAD 2006). In order to proceed with this recommendation, we suggest a feasibility study to
determine to what extent would the introduction of collateral requirements improve repayment rates without
affecting access to loans.
In case of default, consequent procedures should be determined according to the circumstances and specific
causes of the default. In most cases, including external environmental factors such as a flood, which
contributes to the failure of the crop, other sources of income for the producer should be considered for
repayment. Easier repayment options could be explored only in that light.
Furthermore, in the case of intentional default, strict financial actions should be carried out. The successful
experience with ProCredit Bank El Salvador supports the effectiveness of this policy, where annual nominal
interest rates were charged on the unpaid loan principal, ranging between 12 and 27 per cent (Meyer). It is
therefore recommended that similar practices be undertaken by Mangle.


1.6.2 Recovering Administrative Costs

Definition of Practice:
According to the Russian Microfinance Project, interest rates need to be high enough to cover both
operational and financial costs in order to have a financially viable institution. These interest rates include the
direct and indirect costs involved in the processing, disbursal, and repayments of the microcredit loans.
Individually tailored micro loans are far more labor intensive than traditional bank loans; in order to recover
all of the administrative costs associated with loan processing and disbursal, interest rates must increase
accordingly (Guntz, 2011).

Evaluation of Practice: Unsuccessful

The interviews conducted with Mangle administrators have revealed that the Board of Directors set the
interest rate for loans within the black bean program at 7%. The rationale behind the rate is to cover the 6%
interest rate on the loan Mangle receives from ALBA with the expectation of a profit margin of 1%.
However, given that ALBA charges a loan processing fee, the profit margin is reduced to less than the
expected 1% and even before all of the indirect costs of loan distribution were taken into consideration, this
margin was found sometimes to be negative. Interviews with the accountants as well as the Board of
Directors have revealed that no administrative costs, loan loss provisions, or transaction costs are taken into
consideration when the interest rates for micro loans are determined. Capping the interest rate to a low 7% is,
as explained by the Board of Directors, an attempt to uphold the social mission of Asociacin Mangle.
However, the consistent losses inflicted by the low interest rates, combined with the low repayment rates, are
seriously threatening the sustainability of the lending program and, in turn, Mangles ability to uphold its
social mission of continued provision of such services in the future.
According to Evers et al. (2000), as an institution increases the number of small loans it disburses,
operational costs greatly increase as well. The relationship between Mangle and the two local organizations it
partners with, OIKOS and COMUS, is another opportunity through which Mangle can recover
administrative costs. OIKOS and COMUS each handle the administration of loans in their respective
geographical areas; however, since Mangle transports inputs to its partner organizations it still bears the
entire burden of costs related to transportation as well as the transaction costs from ALBA.

In order for appropriate interest rates to be determined, we recommend hiring additional accountants with
specifically agricultural experience, or, alternatively, training agronomists in accounting (IFAD 2006). This
will help to bridge the gap between the financial and agricultural aspects of decision-making as it pertains to
loan terms; it will also further ensure that loan terms are suitable for agricultural needs and, at the same time,
sufficiently sound economically to ensure programmatic sustainability.
In addition, administrative expenses, inflation and depreciation, cost of loan losses, and costs of obtaining
funds from other sources are all factors that should be taken into consideration when deciding an interest
rate. It is recommended, therefore, that the Board of Directors set interest rates that accurately cover all costs
associated with loan disbursal.
Finally, it is recommended that both the operational and transaction costs be shared among Mangle and all
future partner organizations, including those with whom it currently works, i.e. OIKUS and COMUS.

1.6.3 Improving Operational Efficiency

Definition of Practice:
The high interest rates associated with microfinance are due to high operational costs; therefore, operational
costs are one of the greatest challenges for microfinance institutions. Those institutions that strive for
financial self-sufficiency must fully cover their cost of operations, making efficiency a key objective (IFAD,
2006). If a microfinance institution is able to reduce operating costs by 5% without increasing default, losses,
or any other expenses, it will be able to translate this savings into a 5% decrease in loan interest rates, or a
5% increase in profits, or any combination thereof, according to a bulletin report by the Microfinance
Information Exchange (Gonzales 2007). (
Operational sustainability, in which the institutions income covers operating expenses and the cost of
obtaining funds, can be easily achieved by the organization and at a lower cost to the borrower, by improving
internal procedures to maximize efficiency. These include a strict division of labor between different
organizational activities, improved communication between organization levels, decentralized decisionmaking, and rigorous documentation processes for labor and other costs, which will help to identify and
resolve deficiencies.

Evaluation of Practices: Unsuccessful

A series of interviews with Mangle personnel including accountants and technical experts indicated
significant problems in operational efficiency. Mangle accountants are involved in all of Mangles projects,
and must divide their time between microcredit administration and other accounting activities. This
overburdening of employees was found to result in high losses in efficiency.
Interviews revealed that lack of communication and lack of equal access to information among Mangle
personnel further contributed to operational inefficiencies. Crucial decision-making with regard to the
microcredit program was found to take place among the Board of Directors alone, with little input from
accountants or technical assistants. This top-down structure requires communications to flow through
multiple channels to reach intended recipients, and efficiency is therefore further compromised.
Finally, record-keeping and documentation of costs and time expenditure were found to be lacking; because
personnel do not record labor costs for work within different projects, areas of improvement are difficult to
identify. Although a manual of operational procedures for the disbursal of loans does exist, interviews
revealed that this manual was not in fact used.

In order to confront these issues, we recommend that Mangle use uniform accounting procedures, and divide
accounting tasks by activity, allowing accountants to devote time to learning the nuances of loan
administration within each of the sectors, thus improving labor efficiency. This will be especially important
within the structure of Xinachtli.
It is further recommended that a more fluid structure of information sharing among Mangle personnel be
created. This information sharing can take place through regular meetings with loan administrators,
accountants, board members, and technical experts to ensure equal access to information and clear

communication between parties. Moreover, it is recommended that all major decision-making with regard to
the microcredit program include the input of accountants and technical experts, who have a greater
familiarity with important aspects of the microfinance program and agricultural requirements respectively. In
addition, within the day-to-day loan administration activities of Xinachtli, decision-making should be
decentralized, so that bureaucratic efficiency losses are minimized.
Finally, it is recommended that Mangle institute clear documentation processes so that all of the costs
associated with the microcredit program are clearly identified and recorded. First, Mangle accountants and
technical experts should carefully record the labor time spent on lending to each client, categorized by
activity, such as, processing loan contract, or regular production monitoring visit. This will facilitate
future Human Resources studies and, at the same time, help make the identification of relative costs easier.
Moreover, Mangles accounting personnel have expressed the need for an updated operating manual, which
could increase future efficiency in removing administrative obstacles that have been previously encountered
and documented.

1.7 Looking Forward

The best practices used in this evaluation can be applied to other sectors receiving agricultural micro loans,
thus allowing Asociacin Mangle and future Team El Salvador project teams to refer to those best practices
when designing new microcredit lines and evaluating existing lines. While some elements of best practices
will change slightly between credit lines, for the most part best practices will be the same within the
agricultural sector. In addition, the outcome of this project should offer some guidance when the policies and
operational structure of the new Xinachtli microcredit institution are designed. We hope that future student
delegations will assist in the implementation of these recommendations within Xinachtli and the evaluation
of the institution post-implementation.
We also believe that a fully developed business plan would be highly valuable to the future success of
Xinachtli. A business plan should incorporate not only best practices of loan administration but also the
financial recommendations outlined in Part II of this report. However, it should be noted that this type of
business plan would require a team of students or professionals with training in business development,
market analysis, accounting and financial management, and may require a significant time commitment.
Nevertheless, if the involvement of MBA students in future Team El Salvador delegations continues to
increase, and if the work of students with Asociacin Mangle beyond the January delegations continues to be
sustained, we believe that Team El Salvador can support Mangle staff in the development of a detailed
business plan to achieve maximum success with Xinachtli.


2.0 Introduction
In addition to a series of best practices, this year Team El Salvador 8 was asked to produce an exploratory
cost structure for production programs within Xinachtli, based on the costs incurred during the adminstration

of the current black bean microlending program. While the following evaluation should be considered
preliminary, an assessment of lending program costs is a necessary task to ensure the financial sustainability
of microfinance operations. As a result of our data collection and analysis, the following report includes a
number of findings and recommendations as well as several provisional financial spreadsheets based on
current credit lines. These may help the organization better understand and manage the costs of its programs,
and may additionally assist in the transition from the current lending program to the fuller-scale lending
institution, Xinachtli. The provisional financial spreadsheets include a sample budgeting income statement
(Table 1) based on the current black bean production program; a sample budgeting income statement for selffinanced lending, for comparison (Table 2); a tentative activity- based cost structure (Table 3) based on the
black bean program; and a tentative accounting of the costs of a single loan product under the black bean
program (Table 4). We hope that these statements and the resulting findings can be extrapolated and used to
improve the design of the oncoming Xinachtli program.
A tentative budgeting income statement, like the one produced in Table 1, should serve to ensure that each
lending program undertaken by Xinachtli is economically feasible for the long-term sustainability of the
lending institution by balancing the income from the program against its costs. Once the organization
achieves financial independence, the income statement will appear as in Table 2. While the cost structure
shown here (Table 3) is not complete, a fully elaborated cost structure would allow Mangle to assess the
financial costs of each operational activity that forms part of the lending program, and attribute these costs to
single loan products or credit lines. In its final form, a cost structure would enable Mangle to produce an
accounting statement of a single loan product or line of credit (as in Table 4), making it easier to manage
costs based on underlying lending activities. By using activity-based costing (ABC) to produce a cost
structure, managers should be able to understand causes of different product costs and improve the efficiency
of lending programs.

2.1 Methodology
During January 2014, we gathered information pertaining to the types of core activities that must be carried
out to achieve success in an agricultural microfinancing program, as well as information regarding the
current accounting structure of the program. This information is based on a review of documents, including
lending records and any accounting of production costs and operating costs, as well as on semi-structured
interviews with loan accountants and administrators, technical experts, and production program personnel.
Our interviews with Mangle accountants, technicians, and production program coordinators (see Part I for
interview summaries) allowed us to capture several loan administration costs that are not recorded or
accounted for, although the costs captured may not be comprehensive.
In order to synthesize and analyze the data we gathered and draw conclusions, we attempted to follow the
methodologies outlined in two guiding documents, the Microfinance Product Costing Tool produced by the
Consultive Group to Assist the Poor (CGAP) and the World Bank Group, and Creating a Budget: A Selfstudy Guide for Microfinance Institutions by the Rural Finance Learning Center.

2.2 Limitations


It should be noted that members of the commercial microfinance team of Team El Salvador 8 are not
explicitly trained in accounting, nor in budgeting methodologies specific to microfinance institutions. The
financial spreadsheets and findings here are simplified models that may contain errors and are not intended to
be comprehensive. Rather, they are meant to act a starting point to improve the understanding of product
costs and to help guide future financial evaluations.
In addition, as our time in El Salvador was limited, we did not complete the costing exercise we began on the
ground. While we did gather information on the types of activities necessary to operate a lending program,
we were unable to gather reliable data on the staff time spent carrying out these various activities, nor the
costs of each activity. We hope that future studies and costing exercises can help assign specific costs to
lending activities. A full costing exercise would allow Asociacin Mangle to attribute these activities to final
loan products, enabling administrators and production program personnel to determine the cost components
of single loan products within production programs, including any hidden costs. Importantly, a full costing
exercise would reveal inefficiencies that might hinder the growth and development of the microlending
organization, and would enable lenders to better manage the costs of the program.
Finally, in order to elaborate the tentative budgeting income statement and assess the core activities of
Mangles current lending programs, we relied heavily on information gathered from one to two
representatives of microlending program departments (accounting, technical assistance/expertise, production
program management) that were directly involved in the activities of the lending program. However, in order
to gather reliable information that truly reflects the reality of the time and costs spent on lending activities,
more personnel should be interviewed for future costing exercises.

2.3 Findings and Recommendations

2.3.1 Redesign the financial elements of microcredit loans to guarantee program viability.
In order to successfully budget for a microfinance lending activities under Xinachtli, it is necessary that
Asociacin Mangle improve the design of its current microfinance system by restructuring the interest rate,
the coverage of administrative expenses, and the accounting of loan loss provisions to reflect the true costs of
lending. By improving these elements of the current income statement, Mangle can ensure that its
microfinance program is financially viable. Here we outline the requirements for successful income
budgeting as a microfinance organization, which are not employed in Mangles current microfinance


Ensure that income is greater than expenses:

In order to produce a positive net income for the lending program, the total financial income must
exceed the sum of the costs of the program, including total financial costs, provision for loan losses,
and total operating expenses (In Table 1, g > j + m + u). In other words, the interest rate on loans
outstanding plus the loan fee or service charge on each outstanding loan must cover the costs of
microlending activities, including financial and operational costs, and provisions for loan losses.
Account for loan loss provisions:


Currently, Mangle does not account for loan loss provision expenses, even though agricultural
lending tends to have a higher rate of loan loss than other lending activities. The loan loss provision
expense is a non-cash expense used to create a loan loss reserve, and is calculated as a percentage of
the value of the gross loan portfolio (a + b + c) that is at risk of default. Microlending institutions
generally establish a loan loss provision expense equal to between 2 and 5% of the active loan
portfolio (GDRC, 2014). The rate of loan loss provisions should be proportional to the level of credit
risk the institution undertakes as a result of agricultural lending.

Eliminate double losses:

Asociacin Mangle currently incurs double losses, as it pays a loan service fee on its ALBA debt
without passing on this cost to borrowers, while simultaneously covering its own administrative
expenses without transferring costs to borrowers. While ALBAs loan service fee should be
internalized within the interest rate, Mangle should also consider levying a minor loan fee or service
charge on each loan disbursed to help recover a portion of its own variable (per-transaction)
administrative costs, including client assessment, paperwork, accounting, loan disbursement, and
ongoing loan maintenance. Loan fees or service charges are small, one-time payments and are
typically quantified either as a percentage of the principal, as a flat rate, or as a tiered flat rate based
on loan size. Mangle should use cost allocation methods (see below) to assess average variable
administrative expenses and determine a reasonable loan fee or service charge.


Account for cost of debt and administrative expenses when determining interest rates:
Loan interest rates should be determined based on an accounting of the expenses incurred throughout
the lending process. In fact, according to CGAP (2002),
An interest rate placed arbitrarily at 1% above the cost of funds will not provide adequate margins to
recover loan losses and administration expenses, even if the microlending institution levies a loan fee
or service charge (at a reasonable rate). The cost of funds should not be used as the sole baseline to
determine interest rates; it is only one of several factors the institution must take into account,
including administrative expenses, loan losses, the desired capitalization rate, and any investment
income (see CGAP Occasional Paper, Microcredit Interest Rates (1996) for a full discussion of the
microcredit interest rate formula). In addition to internalizing the costs of lending, the interest rate
should also provide a small margin for the lending institution. Mangle should undertake a feasibility
study to establish the size of the margin needed to sustain lending activities and maintain Xinachtlis
financial viability, while also considering the ability of borrowers to pay higher interest rates.
Asociacin Mangles primary interest is the welfare of community members, and it is therefore
highly concerned about the possibility of compromising its social mission by raising interest rates
and levying service charges. Nevertheless, achieving financial viability within this program should
take precedence at this time, as the organization will be unable to maintain the provision of services

to local producers unless financially sustainable practices can be upheld. The general consensus
among experts is that access to credit is of greater importance to poor rural borrowers than actual
interest cost, to a reasonable degree, especially when compared to conventional or informal banking
alternatives, total household costs, and other streams of income (CGAP, 2002).

2.3.2 Create a feasible timeline for financing Xinachtli to achieve financial independence
It is unrealistic to assume that the new microfinance institution, Xinachtli, will be self-financed within any
upcoming period. Rather, it will likely take years of efficient operations to reach the point at which the new
institution can consider itself financially independent. In order to ensure that such a time comes and to
prepare for it accordingly, Mangle should work with financial experts to produce a timeline of financing for
the institution, complete with projections of interest rates and financial income, financial and operational
costs, and inflation. Mangle should carefully consider financing options and opportunities in the meantime,
including partnerships with organizations such as ALBA, other development organizations, NGOs, and
businesses, as well as donor (impact investment) funding, and even social enterprise funding for small
businesses. See Tables 1 and 2 for a comparison of income statements between externally financed lending
and self-financed lending.

2.3.3 Undertake an Activity-Based Costing (ABC) exercise

In order to understand the true costs of the lending program, Mangle should undertake activity-based costing,
which would allow the organization to trace the costs of individual products back to the activities and
departments in which they originate. Activity-based costing is meant to assign indirect, or shared costs to
different products based on the activities that go into these products. Unlike traditional cost allocation
methods, activity-based costing gives managers direct insight into why some products cost more than others
by showing how and why costs are incurred. By isolating the causes of the different cost components of
lending, this cost tracing methodology will reveal areas for improvement within the operations of the
microfinance institution, which should lead to increased efficiency and reduced expenses.
We believe that activity-based costing will allow Mangle to best understand the sources of product costs,
preparing the organization to design a lean and efficient operating structure for Xinachtli; however, this
methodology can be time-intensive and requires the cooperation of personnel within all departments
associated with microlending activities. During January 2014, Team El Salvador endeavored to ascertain the
core activities undertaken during the distribution and management of a micro-loan in the black bean
program, and to attribute these activities to individual personnel within Mangle (see Table 2). However, this
should be considered a preliminary account of core activities and processes, not a finalized product.
Due to time constraints, Team El Salvador 8 was unable to complete the activity-based costing analysis,
which would require determining how much time each individual spends on different activities and the
resulting cost of those activities. Therefore, the next step for Mangle is to confirm the core lending activities
and the personnel to whom they are attributed, then carefully gather data on time spent on each activity,
using timesheets, in depth interviews, direct observations, or a combination of all three. Staff salaries and
benefits should then be distributed to activities based on these time estimates. CGAP (2004) recommends

that non-staff costs, such as transportation, supplies, and expenses, be distributed to activities in the same
proportion as total staff time. However, these could alternatively be distributed based on direct use, although
this method is more time consuming. Ultimately, the activity-based costing method will result in accurate
accounting of individual loan products, as shown in Table 3.
Using activity-based costing methods, microcredit program administrators and managers will be able to
determine how to eliminate unnecessary costs and operating inefficiencies, ensuring that inefficiencies are
not passed on to borrowers, and clients pay the lowest possible cost for loan products. As stated by CGAP


The accounting methods and tables used in this evaluation can be modified slightly and used in other lines of
microcredit, and may be extrapolated for use under the new operational structure of Xinachtli. This would
allow Mangle to preliminarily project different scenarios by looking at the financial outcomes of using
different interest rates and loan fees, taking into account that the tables are not comprehensive and should be
used only for guidance. While the assumptions and financial data used here may differ between lines of
credit and may be significantly different under Xinachtli, the outcome of this project should nevertheless
serve as an initial guideline for future financial evaluations of Asociacin Mangles microcredit program.
Finally, with the understanding that a full activity-based costing exercise will require significant time and
effort, we recommend the involvement of a Team El Salvador student or student group to help undertake this
task, ideally as soon as possible.


Table 1: Example of Budget Income Statement for Externally Financed Lending*

Loan Portfolio
a. Current loans ($)
b. Past due loans ($)
c. Restructured loans ($)
Financial Income:
d. Principal on loans ($)
e. Interest on current, past
due, and restructured loans ($)
f. Loan fees/service charges
g. Total Financial Income
Financial Costs:
h. Debt principal ($)
i. Interest on debt ($)
j. Loan fees/service charges
k. Total Financial Costs ($)
l. Gross Financial Margin
m. Provision for Loan Losses
n. Net Financial Margin ($)
Operating Expenses:
o. Salaries
(admin/technician) ($)
q. Tech. expert visit
expenses ($)
r. Supplies (office/tech.
expert) ($)
s. Occupancy expense ($)
t. Other ($)

d x (0.07)
(h x (0.06))
(h x (0.01))






u. Total Operating
Expenses ($)
v. Net Income from
Operations ($)


*Note: This is a simplified model and does not intend to capture all of the costs of microfinancing activities.
**Bracketed variables in red denote negative values

Table 1 Assumptions:

Accounting period is in production cycles rather than months or years

Interest is simple, not compounded (for either loans disbursed or received), and paid in lump sum at the end of the loan cycle
Principal is paid in a single payment at the end of the loan cycle
Total value of loans outstanding = total value of financing received (d = h). This may not necessarily be the case.
In current period, interest rate on microcredit loans provided is 7%, 1% above the interest rate of loans received from ALBA, at 6% interest
(see e; i: e = 1+i), based on information gathered from loan documents and interviews.
In the current period, Mangle does not charge loan processing fees or service charges on loans provided (see f).
In the current period, ALBA does charge loan fees and service charges on loans provided; however, data on the quantification of loan fees was
not available to Team El Salvador members. Therefore, we assumed a 1% service fee charged on loans provided by ALBA (see j), based on
the quantification of loan service fees by similar financing institutions.
Mangle currently does not account for loan losses provision expenses.
Operating Expenses is significantly simplified. For a more detailed accounting of operating expenses see Table 2, Activity-Based Costing
(ABC): Attributing Indirect Costs to Black Bean Microcredit Lending and Table 3, ABC Accounting of Black Bean Microcredit Cost.

Table 2: Example of Budget Income Statement for Self- Financed Lending*

Loan Portfolio
a. Current loans ($)
b. Past due loans ($)
c. Restructured loans ($)
Financial Income:
d. Interest income on
unused lending capital ($)
e. Interest on current, past
due, and restructured loans ($)
f. Loan fees/service charges
g. Total Financial Income
k. Total Financial Costs ($)
l. Gross Financial Margin
m. Provision for Loan Losses
n. Net Financial Margin ($)
Operating Expenses:
o. Salaries
(admin/technician) ($)
q. Tech. expert visit
expenses ($)
r. Supplies (office/tech.
expert) ($)
s. Occupancy expense ($)
t. Other ($)
u. Total Operating
Expenses ($)
v. Net Income from
Operations ($)

(a+b+c) x r
(a+b+c) x sr





*Note: This is a simplified model and does not intend to capture all of the costs of microfinancing activities.
**Bracketed variables in red denote negative values

Table 2 Assumptions:

Accounting period is in production cycles rather than months or years.

Interest for loans dispersed is simple, not compounded and paid in lump sum at the end of the loan cycle.
Principal is paid in a single payment at the end of the loan cycle.
In the future period, the interest rate (r) on microcredit loans provided (see e) will be carefully determined in order to cover the costs of the
program, while also preserving the social benefits of the program to farmers. We assume that this interest rate will be greater than the 7%
charged currently, but will likely be less than the average interest rate on microcredit loans in the region of Latin America, at 30% as of 2011
(Rosenberg, 2013). Therefore, 0.07 < r < 0.30.
5. In the future period, we assumed a loan fee or service charge on loans disbursed by Mangle as a percentage of the loan principal (see f) rather
than as a flat rate or tiered flat rate. For example, for a service charge rate (sr) of 1% of principal, sr = 0.01.
6. In the future period, we assumed a loan loss provision expense of 2.5% of active loan value (see m), as most microfinance institutions
establish an expense of 2-5% active loans value.
7. Operating Expenses is significantly simplified. For a more detailed accounting of operating expenses see Table 2, Activity-Based Costing
(ABC): Attributing Indirect Costs to Black Bean Microcredit Lending and Table 3, ABC Accounting of Black Bean Microcredit Cost.

Table 3: Activity-Based Costing (ABC): Attributing Indirect Costs to

Black Bean Microcredit Lending*

Making Loans
Meet with potential clients
Assess client land and production
Answer client questions/advise
Accept loan application
Review and approve loan application
Assess input needs
Create budget (presupuesto) for
production inputs and preparation of land
Order inputs from suppliers
Perform general loan disbursement
File paperwork/reporting and
recording procedures
Draw up contract
Cut checks
Servicing Existing Loans
Receive production inputs
Process and redistribute production
Regular monitoring visits to production
Extra client visits for production issues
(pests, etc.)
Account for visit expenses (fuel costs,
Produce technical
paperwork/production recommendations
Track repayments and delinquencies
Follow up with delinquent clients
Perform general loan administration
File paperwork/reporting and
Sustaining Activities
Meet with Junta Directiva/Production
Program Coordinators to discuss lending
Maintain relationship with lenders
Apply for new loans
Pay off existing loans
Perform general accounting and
Recruit and train staff
Pay staff
Maintain information technology (loan















tracking software, etc.)

Perform general administration
Total Costs
*Note: This is a simplified model and does not capture all of the activities of the
microfinance institution. Asociacion Mangle should undertake a microfinance
product costing exercise in order to determine the core processes and activities
to evaluate, and to assign costs to each of these activities.

Table 4: ABC Accounting of Black Bean Microcredit Cost





Principal Value of Loan

Land Preparation/Cultivation (disbursed in
the form of a check)
Equipment and machinery costs
Labor costs
Production inputs (purchased by Mangle on
behalf of client)
Foliar products
Total Loan Principal
Revenue from Loan
Interest income (Total Loan Principal x Interest rate
charged to producer)
Loan service charges (Currently none)
Total Revenue from Loan
Financing Cost of Loan
Interest cost of micro-loan (Amount of Total Loan
Principal debt financed by ALBA x Cost of Debt)
Debt fees paid for micro-loan ([Amount of Total Loan
Principal debt financed by ALBA/total amount
borrowed from ALBA] x Loan service charge by ALBA)
Total Financing Cost of Loan
Gross Financial Margin
Provision for Loan Loss (Loan value x loan loss
provision %)
Net Financial Margin
Indirect Costs of Loan*
Salaries of technical experts
Salaries of accountants/administrators
Transaction costs of inputs
Technical expert visit expenses (fuel, supplies, etc.)
Office supplies
Occupancy expense
Processing production output
Transportation of production output to end client
Transaction of sales profits back to producers
Total Indirect Costs of Loan
Net Income from Loan



* Should be attributed to single loan based on activity based costing (ABC)

method, see Table 2.

3.0 Appendices
3.1 Appendix 1: References
The Consultive Group to Assist the Poor (CGAP) (2004). Microfinance Product Costing Tool. CGAP
Technical Tools Series No. 6.
CGAP (2002). Helping to Improve Donor Effectiveness in Microfinance: Making Sense of Microfinance
Interest Rates. CGAP Donor Brief No. 6.
CGAP (1996). Microfinance Interest Rates. CGAP Occasional Paper.
Global Development Research Center (GDRC). Loan Loss Reserve. Microcredit and Microfinance
Glossary. Accessed January 2014 at <>.
Rosenberg, R. et al. (2013). Microcredit Interest Rates and their Determinants: 2004-2011. Access to
Finance Forum: Reports by CGAP and Partners No. 7.
The Rural Finance Learning Center. Lesson 7: Creating a Budget. Self-Study Guide for Staff of MicroFinance Institutions. Accessed January 2014 at

3.2 Appendix 2: Interview Questions

3.2.1 Appendix 2a: Questions for Loan Administrators
Please briefly describe your role at Mangle as it relates to the granos bsicos program
(in particular, the production of hybrid corn internally by Mangle, and the production of
back beans for ALBA)
Por favor describan brevemente su papel en Mangle en relacin al programa de granos
bsicos, en particular, al programa de produccin de maz hbrido y al programa de produccin
de frijol negro para ALBA.


Corn Production:
How does the hybrid corn production program work? Please give a detailed step by step
description beginning with the solicitation of the loan and the purchase of the seed. This will
help us determine all of the direct and indirect costs associated with the program.
Como funciona el programa de maz hbrido? Paso por paso describa por favor el proceso
empezando con la solicitacin del prstamo y la compra de la semilla. Esto nos ayudar a
determinar todos los costos, tanto directos como indirectos, asociados con el programa.

How/when is the purchasing price of the corn determined?

Cmo y cundo se determina el precio de venta del maz al gobierno?


What are the terms of the loan from the National Bank?
Qu son los trminos del prstamo del BFA?


To confirm, must Mangle purchase the hybrid seed, or is it provided by the government? If it
must be purchased, at what price?
Para confirmar, Mangle tiene que comprar la semilla al gobierno, o es donada? Si tiene
que comprarla, a que precio?


What the interest rate of Mangles loan from the national bank?
Qu es la tasa de inters del prstamo que le otorga a Mangle el BFA?


How does Mangle repay the loan to National Bank? Does it pay both interest and the principal
payment after the harvest? Is there any type of loan processing fee?
Cmo repaga Mangle el prstamo de BFA? Paga el inters y el capital al mismo tiempo al
final de la cosecha, o hay algn otro tipo de modalidad para reembolsar el prstamo al


Is there a loan processing fee levied on Mangle by the National Bank?

Hay algn tipo de cuota de procesamiento del prstamo que le impone BFA?


How do you document the costs associated with the hybrid corn program?
Cmo documentan los costos asociados con el programa de maz hbrido? Por ejemplo,
una hoja de datos computarizada?

10. May we see any documented costs of the hybrid corn program, both direct and indirect?
Nos permitiran ver la documentacin de los costos, tanto directos como indirectos?
11. What are the terms of the loan from Alba?
Qu son los trminos del prstamo de ALBA?
12. What the interest rate of Mangles loan from ALBA?
Qu es la tasa de inters del prstamo que le otorga a Mangle ALBA?


13. How does Mangle repay the loan to Alba? Does it pay both interest and the principal payment
after the harvest? Is there any type of loan processing fee?
Cmo repaga Mangle el prstamo de ALBA? Paga el inters y el capital al mismo tiempo
al final de la cosecha, o hay algn otro tipo de modalidad para reembolsar el prstamo a
14. Is there a loan processing fee levied on Mangle by ALBA?
Hay algn tipo de cuota de procesamiento del prstamo que le impone ALBA?
15. How did you find producers to participate in the ALBA program, or what was the process of
Cmo se seleccionaron a los productores que participan en el programa de ALBA? O
hubo un proceso de solicitud de parte de los productores?)
Frijol Production:
16. Please describe in detail the administration of loans from start to finish. Please be as thorough
and detailed as possible as this will help us to determine the costs of loan administration to
Por favor describa en detalle todo el proceso de administracin de los prstamos desde el
principio hasta al fin. Por favor, que sea lo ms detallado posible, ya que esto nos ayudar
a determinar los costos de administracin de prstamos para Mangle.
17. What lines of credit are currently in operation? Shrimp, cattle, etc.
Qu lneas de crdito existen actualmente? Camarn, ganadera, etc.
18. What requirements must a producer meet in order to receive a loan for the production of beans?
Qu requisitos debe satisfacer un productor para recibir un prstamo para la produccin
de frijol negro? Por ejemplo, un buen record de reembolso de prstamos anteriores?
19. Who might be rejected/excluded from access to loans from Mangle?
A quin se le podra negar un prstamo, y por qu?
20. What are the conditions of the loan?
Qu son las condiciones que se imponen para el uso del prstamo?
21. What is done to ensure that these are followed?
Qu se hace para asegurar que stas sean cumplidas?
22. Is there a contract between Mangle and each producer? If so can we see it?
Existe un contrato entre Mangle y cada productor del frijol? Si lo hay, nos permiten
23. Are the needs of each producer assessed individually? If yes, what is the process of assessment


of these needs? (Figure out relationship between land and resources)

Son evaluadas las necesidades de cada productor individualmente? Si es as, que es el
proceso de evaluar estas necesidades?
24. What are the components of the loan (in terms of both the inputs provided by Mangle, and the
monetary loan given to producers? (ask about land and water if they dont come up)
Cuales son los componentes del micro prstamo que otorga Mangle (por ejemplo insumos
provedos por Mangle, prstamo de dinero, etc.)?
25. What is the average loan size to participants in the black bean program?
Qu es el tamao promedio del prstamo dado a los participantes en el programa de frijol
26. To confirm, is the seed provided to Mangle by ALBA, or must it be purchased?
Para confirmar, ALBA le da la semilla a Mangle, o tiene que comprarla Mangle a ALBA?
27. How/when is the purchasing price of the beans determined?
Cmo y cundo se determina el precio de venta del frijol negro a ALBA ?
28. How many producers of frijol are currently receiving microcredit loans?
Cuntos productores de frijol estn recibiendo prstamos de microcrdito ahora?
29. Do you foresee that number changing? For example, if Alba wanted to produce more beans next
Se prev un cambio en este numero? Por ejemplo, en el caso de que la cosecha sea buena,
y Alba quiera producir ms frijol el ao que viene.
30. How do you keep track of the loans and producer information?
Cmo documentan la informacin sobre los productores y los prestamos que reciben?
31. How do you document the costs associated with the hybrid corn program?
Cmo documentan los costos asociados con el programa de maz hbrido? Por ejemplo,
una hoja de datos computarizada?
32. May we see any documented costs of the black bean program, both direct and indirect?
Nos permitiran ver la documentacin de los costos, tanto directos como indirectos?
33. Do you have a software program to track loans, if so can we see it?
Tienen para eso un programa de software? De ser as, lo podemos mirar?
34. How often do you communicate with producers in the frijol program?
Con que frecuencia se comunican los administradores con los productores en el sector del


35. How often do you meet with the producers in person?
Con que frecuencia se renen con los productores en persona?
36. What is the interest rate of loans to bean producers?
Cul es la tasa de inters de los prstamos para los productores de frijol?
37. How is this interest rate determined?
Cmo se determina la tasa de inters?
38. How is the interest compounded?
Cmo est compuesto el inters?
39. What is the average repayment rate within the black bean program? How does this number
compare to the average repayment rate in the microcredit program as a whole?
Qu es la tasa de reembolso promedio en el programa del frijol negro? Cmo se compara
este numero con el promedio del programa de microcrditos en otros sectores?
40. If the producers are unable to repay what do you do?
Si los productores no pueden reembolsar el crdito, que pasa? Qu medidas toman
41. What is the process if the harvest/crop is compromised due to unexpected events?
Qu sera el proceso administrativo si la cosecha es afectada debido a acontecimientos
42. What are the options for the producer in case of default? (Impago de prestamos)
Qu son las opciones para el productor en caso de impago de prestamos?
Refinanciamiento, etc.
Administrative Costs:
43. Is there any technical assistance given with loans?
El prstamo va acompaado de algn tipo de entrenamiento o asistencia tcnica?
44. Are technical (agricultural expertise), administrative (wages of administration/rent etc), and
logistical (transportation etc) costs internalized?
La tasa de inters internaliza los costos indirectos? Tales costos podran incluir los costos
administrativos (por ejemplo, los salarios del personal), costos tcnicos (por ejemplo, el
entrenamiento), y costos de logstica (por ejemplo, el transporte de insumos y del producto


45. Is there some sort of processing fee included in the cost to producers? If so, what is it?
El costo para los productores incluye una tarifa administrativa de tramitacin del
prstamo? De haberla, qu es?
46. If not, have you considered the possibility of applying a loan processing fee?
Si no, han considerado la posibilidad de aplicar una tarifa de tramitacin de prestamos?
47. How many Mangle staff are involved in the administration/distribution of a loan in the black
bean program from start to finish?
Cuntos empleados de Mangle estn trabajando en la administracin y distribucin de
cada prstamo en el programa del frijol negro?
48. How many man-hours are spent, on average, on the administration/distribution of a single loan
from the start of the loan cycle to its closure?
Cuntos horas laborales se dedican, en promedio, a la administracin de un solo
prstamo, desde el principio del ciclo del prstamo hasta el final? (costos iniciales de la
administracin del prstamo (trmites/papeleo, etc), asistencia tcnica, evaluacin y
monitoreo, y repago y cierre del prstamo).
49. In which activity or activities is most of your time spent? Do you consider that a different
distribution of your time would be more effective?
A cul actividad (o actividades) de stas le dedica la mayor parte de su tiempo laboral? Le
parece que una distribucin de tiempo laboral distinta podra ser ms efectiva?
50. What are some of the problems that have come up with the administration of the loans?
Qu retos o problemas han surgido en la administracin de los prstamos?
51. Do the loan administration staff have any expertise in the production of particular agricultural
products, for example, black beans or hybrid corn?
El personal administrativo de los prstamos, Tiene algn conocimiento tcnico en el
cultivo de productos agrcolas, por ejemplo, en el cultivo de frijol negro o maz certificado?
52. Do you feel that you can cover all labor needs within the larger Xinachtli system with current
staff, or will you need to hire in order to meet your needs?
Piensan que el personal administrativo actual es adecuado para cubrir las necesidades
laborales del sistema Xinachtli, o piensan que ser necesario contratar a ms personal?
53. What will be the qualifications you look for when hiring new staff for these purposes?
Qu seran las cualificaciones que buscaran en el personal nuevo?
54. How do you feel about hiring and training existing producers/agricultural experts to become
loan administrators/monitoring support staff?


Qu les parece la posibilidad de contratar y entrenar a productores o peritos agrcolas

para trabajar en la administracin y monitoreo de los prstamos?

3.2.2 Appendix 2b: Questions for Technical Experts

Please describe in detail the activities of a technician from the start of a production cycle to its finish.
Please be as thorough and detailed as possible as this will help us to determine the costs of these activities
to Mangle.
Por favor describa en detalle todas las actividades de un tcnico desde el principio del ciclo de
produccin hasta el fin. Por favor, que sea lo ms detallado posible, ya que sto nos ayudar a
determinar los costos para Mangle de la asistencia

As a technical expert, how many hybrid corn producers are under your management currently?
How many of these receive microcredit loans from Mangle?
Cmo tcnico, cuantos productores de maz hibrido tiene Ud. a su cargo actualmente?
Cuantos de stos reciben prstamos de Mangle para la produccin?


As a technical expert, how many black bean producers are under your management currently? To
confirm, do all of these receive microcredit loans from Mangle?
Cmo tcnico, cuantos productores de frijol negro tiene Ud. a su cargo actualmente? Para
confirmar, todos reciben prstamos de Mangle para la produccin?


How many total manzanas of land are being used to produce hybrid corn?
Cuntas manzanas en total se estn se estn utilizando para producir el maz hbrido?


How many total manzanas of land are being used to produce frijol?
Cuntas manzanas en total se estn se estn utilizando para producir frijol?

5. How often do you communicate with producers in the frijol program?
Con que frecuencia se comunica con los productores en el sector del frijol?

How often do you communicate with producers in the hybrid corn program?
Con que frecuencia se comunica con los productores en el sector del maz hibrido?


How often do you meet with the producers in person?

Con que frecuencia se renen con los productores en persona?


How often do you communicate with the accountants of Mangle?

Con que frecuencia se comunica usted con los contadores de Mangle?


What level of interaction do you have with the board of Mangle, and do you have any input in
the decisions that they make with respect to the production program?


Qu nivel de interaccin tiene Ud. con la Junta Directiva de Mangle, y tiene Ud. algn
tipo de incidencia en las decisiones que toman con respeto al programa de produccin?
10. How do you participate in the administration of the loans?
Cmo participa Ud. en la administracin de los prstamos?
11. How closely do you work with the loan administrators?
Qu tan de cerca trabaja Ud. con los administradores de prstamos?
12. Are the needs of each producer assessed individually? If yes, what is the process of assessment
of these needs?
Son evaluadas las necesidades de cada productor individualmente? Si es as, que es el
proceso de evaluar estas necesidades?
13. How much time do you spend assessing the needs of accepted producers and ordering the
necessary inputs?
Cunto tiempo se dedica a la evaluacin de las necesidades de los productores aceptados,
y en pedir los insumos necesarios?
14. Before a loan applicant is accepted or rejected, how much time do you spend assessing the
suitability for production of new loan applicants? Can you briefly describe this process?
Antes de aceptar o rechazar una solicitud de prstamo, cunto tiempo pasa evaluando si
es el solicitante es capable de producir adecuadamente? Podra describir brevemente este
15. Is there a monitoring system to assess the health and quality of the crop during the production
cycle? If so, how often is production monitored? What do you look for?
Hay una sistema de monitoreo para evaluar la salud y la calidad del producto durante el
ciclo de produccin? Si existe tal sistema, con que frecuencia visita los sitios? Qu lo que
busca al visitarlos?
16. How much time do you spend monitoring the producers and providing assistance when
Cunto tiempo pasa en el monitoreo de los productores y en proveer asistencia tcnica
cuando es necesaria?
17. Do you hold trainings for the producers? How often? Can you describe them?
Se organizan capacitaciones para los productores? Con que frecuencia? Podra
18. How much time do you spend organizing and carrying out training sessions for producers?
Cunto tiempo dedica a organizar y llevar a cabo talleres de entrenamiento para


19. Do you participate in ongoing training? How often? Can you describe them?
Cmo tcnico, participa usted en capacitaciones continuas? Con qu frecuencia? Podra
20. Within the hybrid corn system, generally who owns the land cultivated by producers?
En el sistema de maz hibrido, quien generalmente es el dueo del terreno cultivado?
21. Within the frijol system, generally who owns the land cultivated by producers?
En el sistema del frijol, quien generalmente es el dueo del terreno cultivado?
22. On average, how much does it cost to use this land?
A promedio, cunto cuesta cultivar un terreno?
23. On average, how much does it cost to prepare this land for each cycle? [irrigation canals]
Promedio, cunto cuesta la preparacin de la tierra para cada ciclo?
24. In general, do producers of hybrid corn and beans have to employ any workers to cultivate the
En general, los productores de maz hibrido y frijoles contratan a mano de obra para
cultivar el producto?
25. In general, how many workers are employed per farm, and during which phases of production?
En general, cuntos trabajadores son empleados por finca, y durante qu fase de la
26. Where do the producers find these workers?
Dnde se encuentran los trabajadores?
27. What is their average wage?
Que es el jornal promedio?
28. Are there costs are associated with the employment of these workers?
Hay otros costos asociados al empleo de estos trabajadores, y qu son?
29. Do the farms that you have responsibility for use organic fertilizer or chemical fertilizer?
Los productores con quienes trabaja Ud. usan abonos orgnicos o fertilizantes qumicos?
a. What kind do they use?
Qu tipo usan?
b. How much does it cost?
Cunto cuesta?
30. Do the producers use insecticides?



Los productores usan insecticidas?

What kind do they use?
Qu tipo usan?
How much does it cost?
Cunto cuesta?

31. Do the producers use herbicides?

Los productores usan herbicidas?
a. What kind do they use?
Qu tipo usan?
b. How much does it cost?
Cunto cuesta?
32. Do the producers use fungicides?
Los productores usan fungicidas?
a. What kind do they use?
Qu tipo usan?
b. How much does it cost?
Cunto cuesta?
33. Do the producers use foliares?
Los productores usan foliares? Para precisar, para qu se usan los foliares?
a. What kind do they use?
Qu tipo usan?
b. How much does it cost?
Cunto cuesta?
34. What are the sources of irrigation?
De donde se consigue el agua para el riego?
a. What are the main challenges associated with procuring this water?
Que son los retos principales asociados con la obtencin del agua?
How much does the water cost?
Cunto cuesta el agua de riego?
35. What types of infrastructure are necessary for production? (Fencing, irrigation systems, etc.)
Qu tipo de infraestructura es necesaria para la produccin? (cercado, sistemas de riego,
36. What equipment is necessary for production?
Qu tipo de equipo o maquinaria es necesaria para la produccin?
37. How much does this equipment cost?
Cunto cuesta este equipo?


38. Is this equipment used for more than one growing cycle?
Se usa este equipo para ms de un ciclo?
39. Are there any other necessary production inputs that we have not described here?
Hay otros insumos de produccin necesarios que no hayamos mencionado aqu?
40. How are the production inputs transported or distributed to the site? Who is responsible for
covering this cost?
Cmo son trasportados y distribuidos los insumos al sitio del cultivo? A quin se encarga
el costo del transporte?
41. How is the product transported after harvest?
Cmo se transporte el producto despus de la cosecha?
42. How much does this cost, and who is responsible for covering this cost?
Cunto cuesta? A quin se encarga el costo del transporte?
43. In your opinion, what are the challenges to the production of corn/frijol?
En su opinin, qu son los retos ms grandes para la produccin de maz/frijol?
44. What could be done to resolve these challenges?
Qu se puede hacer para enfrentar estos retos?
45. To what extent has the support of Mangle impacted the yield or quality of the product?
De que manera ha afectado el apoyo que da Mangle el rendimiento o la calidad del
46. How might Mangle further support producers to improve production outcomes?
Que podra hacer Mangle para aumentar su apoyo a los productores para que mejoren su
rendimiento productivo?
47. Do you have any recommendations to improve the efficiency of the microcredit system?
Tiene Ud. recomendaciones para mejorar la eficiencia del sistema de microcrditos?
48. Do you have any final thoughts to share?
Tiene Ud. alguna otra reflexin a compartir con nosotras acerca de estos programas?

3.2.3 Appendix 2c: Questions for Black Bean Producers

1. Have you applied for, and received, a microcredit loan from:
a. Mangle


Ha soltado y recibido un microcrdito de:
a. Mangle
2. Please describe the nature of your relationship with Mangle (OIKOS/COMUS).
Por favor podra Ud. describir su relacin con Mangle (OIKOS/COMUS).
3. How did you learn about the black bean production program?
Cmo aprendi del programa del frijol negro?
4. Please describe, step by step, the process of applying for this loan from Mangle (OIKOS,
Por favor describa, paso por paso, el proceso de solicitar un micro prstamo de Mangle
5. How many manzanas of black beans are you cultivating?
Cuntas manzanas de frijol negro cultiva Ud.?
6. How many quintales of black beans are you expecting to produce?
Cuntos quintales de frijol negro espera Ud. producir?
7. What is the value of the loans you have received so far from Mangle for the production of black
Qu es el valor (total) de los prestamos que ha recibido Ud. de Mangle (OIKOS/COMUS)f
hasta la fecha para la produccin de frijol negro?
8. What were you producing before black beans?
Antes de empezar a producir el frijol negro, que cultivaba, o que haca de trabajo?
9. Had you received a microcredit from Mangle prior to the credit for black bean production?
Haba Ud. recibido un microcrdito de Mangle (OIKOS/COMUS) antes de recibir el
prstamo actual para la produccin de frijol negro?
10. If so, can you please describe your experience?
De ser as, podra describir su experiencia con el microcrdito?
11. Has anything in the loan process changed since the last time you received a loan?
Ha cambiado algo en la tramitacin del prstamo desde la ultima vez que recibi Ud. un
12. What are your current sources of income?


De qu recibe ingresos actualmente? (De que gana Ud. dinero?)

13. How do you use this income?
Cmo utiliza el ingreso que s recibe?
14. Are you able to save any of your income?
Logra ahorrar parte de su ingreso?
15. If so, what do you plan on spending it for?
De ser as para qu tiene pensado utilizarlo?
16. Do you expect your participation in the black bean program to improve your income compared to
what it was before?
Piensa Ud. que su participacin en el programa de produccin del frijol negro aumentar
sus ingresos en comparacin a lo que ha sido hasta la fecha?
17. Do you expect to save more of your income compared to what you have been able to save until
this point?
Espera Ud. poder ahorrar una porcin ms grande de sus ingresos en comparacin a lo
que ha podido ahorrar hasta la fecha?
18. What would you use your extra income for, or what would you plan to do with extra savings?
Cmo utilizara sus ingresos adicionales, o que uso hara de sus ahorros adicionales?
19. Do you hire anyone to help in the fields during production? If so, during which phases and how
many people?
Ud. contrata a trabajadores para ayudar con el cultivo? De ser as, durante que fases de la
produccin, y a cuantas personas?
20. Did you employ anyone to help with production before becoming part of the bean production
program? If so, how does your number of employees now compare to your number before?
Ud. contrataba a gente para ayudar con la produccin antes de participar en el programa
de produccin del frijol negro? De ser as, como compara el numero de empleados que
tiene ahora con el numero que tenia antes?
21. Does the loan cover the costs of your own personal labor?
El prstamo de Mangle cubre los costos de su propio trabajo (el trabajo que hace ud)?
22. Are you a member of a cooperative?
Es usted socio de una cooperativa?
23. If so, how long have you been a member of this cooperative?
De ser as, por cuanto tiempo ha sido miembro de esta cooperativa?


24. How is the land divided among the cooperatives? What size is your parcel?
Cmo esta dividido entre los socios el terreno de la cooperativa? De que tamao es la
parcela que tiene Ud?
25. Please describe your cooperative (people/hectares)?
Podra usted describir su cooperativa? Por ejemplo, el numero de socios, el tamao de la
tierra, el lder de la cooperativa, etc.
26. Do you own your land for cultivation?
Es Ud. dueo del terreno que cultiva?
27. If you lease it, for how long and at what cost?
Si arrienda la tierra, por cuanto tiempo y a que precio?
28. Does the loan provided by Mangle help cover the cost of your rent?
El microcrdito de Mangle le ayuda a cubrir el costo de la arrienda?
29. What inputs and needs are covered by your loans?
Qu insumos, u otras necesidades, se cubren con el microcrdito de Mangle?
30. Have you received any loans from Mangle, or another institution, for infrastructure? For example,
for a well or a fence, or an irrigation system?
Ha recibido Ud. algn crdito de Mangle, o de otra institucin, para la compra de
infraestructura? Por ejemplo, para hacer un pozo, un cercado, un sistema de riego?
31. How does the interest rate of your microcredit with Mangle compare to those of other institutions
from which you might borrow, for example, a bank?
Cmo se compara la tasa de inters del microcrdito de Mangle con las tasas de otras
instituciones de las cuales recibira un prstamo?
32. What type of technical assistance have you received?
Qu tipo de asistencia tcnica ha recibido Ud.?
33. How often do you communicate with Porfirio about the condition of your crop?
Con que frecuencia comunica Ud. con Porfirio sobre el estado del cultivo?
34. How often do you share information about production methods with producers outside of your
Con que frecuencia comparte Ud. informacin sobre de mtodos de produccin con
productores que no forman parte de su cooperativa?
35. What are the challenges of participating in the black bean program (in terms of both cultivating
beans, and applying for loans)?
Qu son los retos principales de participar en el programa del frijol negro (tanto en


trminos de la produccin del frijol negro, como en la administracin del prstamo?

36. Do you have any recommendations to improve the administration of loans by Mangle?
Tiene Ud. algunas recomendaciones para mejorar la administracin de microcrditos por
37. What could Mangle do to improve its support of producers like yourself, in order to improve
production outcomes?
Que podra hacer Mangle para aumentar su apoyo a productores como usted, para que
mejoren su rendimiento productivo?

3.2.4 Appendix 1d Questions for Producer: Hybrid Corn Program

1. Can you please describe your role within Mangles hybrid corn program?
Puede describir su papel en la programa de maz hibrido de Mangle?
2. Do you receive a loan to produce this corn from Mangle?
Recibe un prstamo para producir el maz?
3. Do other people receive these loans from Mangle?
Hay otras personas que reciben estas prstamos de Mangle tambin?
4. How many manzanas of land do you use to produce the corn?
Cuntos manzanas de la terreno usa para producir el maz/frijol?
5. Who owns the land?
De quin es la terreno?
6. How much does it cost to use this land?
Cunto cuesta usar la terreno? [Who pays for it?]
7. How much does it cost to prepare this land for each cycle? [irrigation canals]
Cunto cuesta la preparacin de la tierra para cada ciclo?
8. Do you work with any of the other producers?
Trabaja con otros productores?
9. Do you have to employ any workers to cultivate the corn?
Necesita emplear trabajadores para cultivar el maz?
10. What were you doing before you began to cultivate the hybrid corn?
Antes de la produccin del maz, que hizo?


11. In your opinion, what are the challenges to the production of corn?
En su opinin, cules son las desafeas de la produccin de maz?

3.3 Appendix 3: List of Key Informants






Jos Amilcar

Mangle Board of Directors and

TES8 Liaison

Ciudad Romero
San Nicholas


8:00 am
1:30 pm

Juan Luna

Production Program Coordinator

and TES8 Liaison

Ciudad Romero
San Nicholas


8:00 am
1:30 pm

Humberto Rosa

Coordinator of Mangles
Microcredit Program

San Nicolas


1:30 pm

Carlos Quintana

Mangle Accountant

San Nicolas


1:30 pm

Antonio Amaya

Producer to the Hybrid Corn


Ciudad Romero


8:00 am

Porfirio Belloso

Technical Expert to the Black

Bean Program

Ciudad Romero


8:00 am


Technical Expert for Mangles

Corn Program

San Nicholas


10:00 am

Santiago Rajo

Producer for Mangles Black

Bean Program

El Mono


2:00 pm

Carmen Argueta

Mangle Board of Directors

San Nicholas


1:30 pm

Luis Ramos

Mangle Board of Directors

San Nicholas


1:30 pm

Ricardo Antonio

Producer for Mangles Black

Bean Program

Salinas del Potrero


11:00 am

Miguel Angel

Producer for Mangles Black

Bean Program

Salinas del Potrero


11:00 am

Antonio Rivera

Producer for Mangles Black

Bean Program

Salinas del Potrero


11:00 am

Victor Giovani

Producer for Mangles Black

Bean Program

Salinas del Potrero


11:00 am

Elmer Alfred
Chavez Diaz

Producer for Mangles Black

Bean Program

Salinas del Potrero


11:00 am


Francisco Daniel
Alvonso Acevedo

Producer for Mangles Black

Bean Program

Salinas del Potrero


11:00 am

Walter Daz

Producer for Mangles Black

Bean Program

Salinas del Potrero


11:00 am


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