About this pageGiveWell aims to find the best giving opportunities we can and recommend them to donors. We tend to put a lot of investigation into the organizations we find most promising, and de-prioritize others based on limited information. When we decide not to prioritize an organization, we try to create a brief writeup of our thoughts on that charity because we want to be as transparent as possible about our reasoning. The following write-up should be viewed in this context: it explains why we determined that we wouldn't be prioritizing the organization in question as a potential top charity. This write-up should not be taken as a "negative rating" of the charity. Rather, it is our attempt to be as clear as possible about the process by which we came to our top recommendations.
A note on this page's publication dateThe last time we examined Fundación Paraguaya was in 2010. In our latest open-ended review of charities, we determined that it was unlikely to meet our criteria based on our past examination of it, so we did not revisit it. We invite all charities that feel they meet our criteria to apply for consideration. The content we created in 2010 appears below. This content is likely to be no longer fully accurate, both with respect to what it says about Fundación Paraguaya and with respect to what it implies about our own views and positions. With that said, we do feel that the takeaways from this examination are sufficient not to prioritize re-opening our investigation of this organization at this time.
SummaryBelow we review the microfinance operations of Fundación Paraguaya, a charity in Paraguay. Fundación Paraguaya offers microloans. It does not offer savings services.1 We do not currently recommend Fundación Paraguaya, feeling that the Small Enterprise Foundation provides a better opportunity for donors interested in supporting microfinance.
Table of Contents
Key questions about social impactIn evaluating Fundación Paraguaya, we asked our key questions for evaluating microlending charities. The sections below cover its answers to our key questions (see the previous link for why we consider these questions important).
Is the organization focused on social impact?
How frequently do borrowers drop out of the program?ACCION, a U.S.-based microfinance network, reports a retention rate for Fundación Paraguaya of 88% for 2009 and 94% for 2008.2 Fundación Paraguaya told us that it calculates its retention rate monthly and uses the formula: number of active clients at the end of the period divided by the sum of active clients at the beginning of the period and new clients during the period.3 For more information on microfinance drop out rates and how they are calculated, see our microfinance glossary.
Does Fundación Paraguaya monitor why borrowers drop out?We have not seen reports on why clients drop out of the program.
Does Fundación Paraguaya prevent client over-indebtedness?We do not know whether Fundación Paraguaya has practices that are effective at preventing over-indebtness among clients.
Are borrowers protected against harassment by loan officers and group members?Fundación Paraguaya provided two reports from audits of loan officers activities.4 We have found that microfinance institutions are very rarely willing or able to share documentation of an internal audit process with us and we applaud Fundación Paraguaya's transparency. There is some evidence from these reports that Fundación Paraguaya's audit process is capable of uncovering cases of misconduct by staff. One of the reports notes an instance in which a a client attempted to pay his or her loan installment in coins and was initially rebuked by the loan officer.5 We do not know how often audits take place, what other cases of misconduct have been uncovered in the past, or how such cases have been dealt with. In addition, Fundación Paraguaya told us that loan officers are evaluated on a wide variety of measures including knowledge of procedures and principles, value of their portfolio and new disbursements, their the default rate, and the number of clients they serve.6 It is possible that such incentives could lead to loan officers pressuring clients to repay or to take out loans they wouldn't otherwise have taken out.
What interest rates does Fundación Paraguaya charge?We do not have enough information on the interest rates Fundación Paraguaya charges to calculate its effective interest rates.7 For more information on microfinance interest rates and how we calculate the cost of a loan to borrowers, see our microfinance glossary.
What is Fundación Paraguaya's repayment rate?According to Fundación Paraguaya's Annual Report for 2009, the rate of default has been below 4.5% for every year since 2004 (it was considerable higher before 2004).8 We do not know how Fundación Paraguaya calculates its default rate. Fundación Paraguaya's portfolio at risk greater than 30 days and write-off ratios have been fairly low in recent years,9 however, we do not know if Fundación Paraguaya reschedules loans. For more information on collection rates and other forms of microfinance repayment rates, see our microfinance glossary.
What are Fundación Paraguaya clients' standards of living?Fundación Paraguaya provided data from a survey of 56 clients. We do not know how these respondents were chosen or when/how the survey was conducted. 86% of respondents reported having access to improved sanitation,10 100% reported having electricity in their homes,11 71% reported owning a refrigerator, 43% a washing machine, 36% an electric or gas oven, and 80% a cellular phone.12 89% reported living on a dirt road.13 89% reported having a television in their home, 32% a video or DVD player, and 0% a computer.14
Room for more fundsFundación Paraguaya told us that donations are not used to support its microfinance program.15
- Repayment rate. How does Fundación Paraguaya track its repayment rate? Can it share data on loans disbursed, written off, rescheduled, and in arrears?
- Interest rates. Are Fundación Paraguaya's rates flat or declining? What fees are charged? What is the repayment schedule?
- Clients' standard of living. Who were the respondents in Fundación Paraguaya client profile survey?
- Drop out rates. What percentage of clients have dropped out of the program each year? How does Fundación Paraguaya calculate this rate? Can Fundación Paraguaya share reports on why clients drop out?
- Client indebtedness. Is there a process for monitoring whether procedures for preventing over-indebtedness are effective?
- Client protection. How often are staff audited? What have past audits found and how have problems been addressed? How is staff performance evaluated and rewarded?
- Room for more funds. How much in additional donations could Fundación Paraguaya productively use in the next year? What would such donations be used for?
- ACCION. Key statistics (December 2009). Fundación Paraguaya asked us not to publish this document.
- ACCION. Key statistics (February 2010). Fundación Paraguaya asked us not to publish this document.
- Fundación Paraguaya. Informe de auditoria no. 65/2010 (PDF).
- Fundación Paraguaya. Informe de auditoria no. 74/2010 (PDF).
- Fundación Paraguaya. Memoria (2009) (PDF).
- Fundación Paraguaya. Social performance standards report (2008) (XLS).
- Fundación Paraguaya. Survey summary (PDF).
- GiveWell. Questions for microfinance charities.
- Mix Market. Data on Fundación Paraguaya (XLS).
- Mix Market. Glossary. http://www.mixmarket.org/en/glossary (accessed May 18, 2010). Archived by WebCite® at http://www.webcitation.org/5pomL0lun.
- Sanabria, Luis Fernando. Fundación Paraguaya General Manager. Phone conversation with GiveWell, June 8, 2010.
- 1. Number of active borrowers (2009): 37,354 Number of depositors (2009): 0 Mix Market, "Data on Fundación Paraguaya (2001-2009)."
- 2. ACCION, "Key Statistics (December 2009)."
- 3. Luis Fernando Sanabria, phone conversation with GiveWell, June 8, 2010.
- 4. Fundación Paraguaya, "Informe de Auditoria No. 74/2010" and Fundación Paraguaya, "Informe de Auditoria No. 65/2010."
- 5. Original text: "Cliente insatisfecho con la atención recibida por el cajero (1 caso). El cliente se molestó porque no le quisieron recibir sus monedas que eran parte de pago de su cuota. (Finalmente le recibieron)...[S]e debe hacer recuerda a la cajera que debe aceptar todo tipo de dinero que este legalmente en curso y asÃ evitar disgustos de clientes que tienen la voluntad de abonar sus cuotas o servicios. Debe llamÃ¡rsele la atención a este respecto." Translation: "Customer dissatisfaction with the attention received by the cashier (one case). The customer was upset because the cashier did not want to receive coins as part of the payment of his/her installment. (Eventually the cashier took them)...It should be recalled that the cashier should accept any money that is legal tender and so avoid trouble for customers who are willing to pay their installments. Attention should be called to this issue." Fundación Paraguaya, "Informe de Auditoria No. 74/2010," Pg 2-3.
- 6. Luis Fernando Sanabria, phone conversation with GiveWell, June 8, 2010.
- 7. Fundación Paraguaya told us: "We charge 24-34% annually, depending on the product. We have 4 main products: an agriculture loan (interest rate: 28-32%), an individual loan (interest rate: 28-32%), a group loan (interest rate: 24-28%), and a consumer loan (interest rate: 34%)...We require clients with group loans to save 10% of the loan." Luis Fernando Sanabria, phone conversation with GiveWell, June 8, 2010. In order to calculate its effective interest rates we would need data on whether rates are flat or declining, what fees are charged, the duration of loans, and how frequently repayments are due.
- 8. Fundación Paraguaya, "Memoria (2009)," Pg 26.
Portfolio at risk > 30 days:
- 2005: 4.11%
- 2006: 5.02%
- 2007: 2.01%
- 2008: 3.46%
- 2009: 5.85%
- 2005: 1.22%
- 2006: 2.10%
- 2007: 4.06%
- 2008: 2.38%
- 2009: 3.33%
- 10. Fundación Paraguaya, "Survey Summary," Pg 24.
- 11. Fundación Pargauaya, "Survey Summary," Pg 25.
- 12. Fundación Paraguaya, "Survey Summary," Pg 26.
- 13. Fundación Paraguaya, "Survey Summary," Pg 28.
- 14. Fundación Paraguaya, "Survey Summary," Pg 33.
- 15. Luis Fernando Sanabria, phone conversation with GiveWell, June 8, 2010.