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 Progresar was in August 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 August 2010 appears below. This content is likely to be no longer fully accurate, both with respect to what it says about Progresar 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.
Published: August 2010
SummaryProgresar is a microfinance institution in Argentina. Progresar offers microloans. It does not offer savings services.1 When we reviewed Progresar, we sought to answer our questions for evaluating microfinance organizations. We do not currently recommend Progresar, 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 Progresar, 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?Progresar told us that its "monthly drop out rates" were 10.75% and 9.3% in the second half of each 2008 and 2009, respectively, and that it calculates this rate as the ratio of clients that leave the program to the total number of loans due for payment during the period.2 It is not clear to us from this definition over what time period Progresar calculates this rate. We have not seen data for other periods. For more information on microfinance drop out rates and how they are calculated, see our microfinance glossary.
Does Progresar monitor why borrowers drop out?Progresar told us that it does not study the reasons clients give for leaving the program.3
Does Progresar prevent client over-indebtedness?Progresar told us that, before every loan, it does the following to determine clients' ability to repay:4
- Visit clients' businesses
- Consult clients' neighbors
- Consult data on the internet about clients' debts and repayment history
Are borrowers protected against harassment by loan officers and group members?Progresar told us that it trains its staff to focus on social rather than financial results. In addition, Progresar told us that staff pay is not linked to repayment rates. Currently, Progresar does not have a formal procedure for evaluating its staff.5
What interest rates does Progresar charge?Progresar appears to charge high interest rates on its loans. We estimate that Progresar's effective monthly interest rate is roughly 10-13% (equivalent to 128-151% APR and 237-341% EIR).6 However, we do not have a complete picture of the total effective costs to borrowers as we do not know the range of loan durations offered by Progresar. Comparing these rates to the Central Bank of Argentina's reported "private interbank" interest rate (9% as of June 18, 2010, equivalent to about 0.75% monthly),7 there appears to be a strong case that Progresar is primarily providing services, not handouts. For more information on microfinance interest rates and how we calculate the cost of a loan to borrowers, see our microfinance glossary.
What is Progresar's repayment rate?We have limited and inconsistent information on Progresar's repayment history. As of 2009, Progresar had fairly low portfolio at risk and write-off ratios, and no rescheduled loans in its portfolio.8 We do not have enough information on Progresar's repayment history to calculate a lower-bound collection rate. For more information on collection rates and other forms of microfinance repayment rates, see our microfinance glossary.
What are Progresar clients' standards of living?Progresar told us that it focuses on serving:9
- "Independent entrepreneurs with enterprises that provide them means of survival or growing businesses in a variety of work areas such as: gardening, carpentry, shoe repair, homemade cooking, clothes production."
- "Low income employees with the need to repair their houses."
Room for more fundsProgresar estimates that it will need about $101,000 in donations in 2011 for its lending program.10
- Repayment rate. Can Progresar provide a full picture of its past repayment rates, including data on loans disbursed, in arrears, rescheduled, and written off?
- Interest rates. Can Progresar share examples of repayment schedules (how much is due and when for a variety of loans)?
- Clients' standard of living. How does Progresar determine whether it is succeeding at targeting poor clients?
- Drop out rates. What have Progresar's drop out rates been in the past? Over what period is this rate calculated? Why have clients dropped out in the past?
- Client indebtedness. Do Progresar's clients become over-indebted?
- Client protection. Are clients adequately protected against harassment from staff?
- Banco Central de la RepÃºblica Argentina. Statistics and indicators: Main variables. http://www.bcra.gob.ar/index_i.htm (accessed June 2, 2010).
- GiveWell. Questions for microfinance charities.
- GiveWell. Progresar interest rate calculation (XLS).
- Mix Market. Data on Progresar (2002-2009) (XLS).
- Mix Market. Progresar: Data, Indicators. http://www.mixmarket.org/mfi/progresar/data (accessed May 27, 2010). Archived by WebCite® at http://www.webcitation.org/5qBZmvxtp.
- Mix Market. Glossary. http://www.mixmarket.org/en/glossary (accessed May 18, 2010). Archived by WebCite® at http://www.webcitation.org/5pomL0lun.
- Progresar. Information for GiveWell (DOC).
- Progresar. Social performance standards report (2008) (XLS).
- 1. Number of active borrowers (2008): 663 Number of depositors (2008): 0 Mix Market, "Data on Progresar (2002-2009)."
- 2. "The monthly drop-out rates for the last 2 years is: 10.75% for the second semester of 2008 and 9.3% for 2009...We calculate the monthly rate as the ratio between the clients that leave the program and the total amount of loans due for payment during that period." Progresar, "Information for GiveWell," Pg 2.
- 3. "We don't have a detailed and formal analysis on why clients drop out." Progresar, "Information for GiveWell," Pg 2.
"There is not a formal process for this kind of monitoring, but we check our clients every time they apply for a new loan to see if they have entered into other debts, thus we keep over-indebtedness under control.
For further detail, the way in which we evaluate clients' ability to pay back their debts has three steps:
- Visiting their micro enterprises and checking incomes and outcomes
- Requesting references about them in the neighborhood where they live and/or work.
- Consulting on line services about debts and repayment behavior."
- 5. "Our goal is much more social than financial, and this is the way in which we hire and train our staff. Our approach is proved in the fact that most of our credit officials are social workers and that we don't pay extra money to our officials if they have better repayment rates. This also helps to avoid harassment. To date we have not had any claim from clients for persecution or harassment...Although we are working on it, and we consider it an important aspect of our organization, we still don't have a formal procedure for evaluating and rewarding our staff." Progresar, "Information for GiveWell," Pg 3.
- 6. Data is from Progresar, "Information for GiveWell." Calculations are in GiveWell, "Progresar Interest Rate Calculation." Annual percentage rate (APR), effective interest rate (EIR), and monthly rate were calculated by GiveWell. Note that the APR is equal to 12 times the monthly interest rate, while the EIR fully incorporates "compounding," whose relevance to microloans is debatable. For more information on calculating interest rates for microfinance banks, see Langeman 2010.
- 7. Banco Central de la RepÃºblica Argentina, "Statistics and Indicators: Main Variables."
Portfolio at risk > 30 days as of December 31:
- 2004: 0.24%
- 2005: 0.00%
- 2006: not listed
- 2007: not listed
- 2008: 3.57% (Progresar, "Information for GiveWell" reports this as 1.83%)
- 2009: 4.65% (Progresar, "Information for GiveWell" reports this as 5.16%)
- 2010 (as of June 30): 4.64%
- 2004: 0.00%
- 2005: 0.00%
- 2006: not listed
- 2007: not listed
- 2008: 0.00% (Progresar, "Information for GiveWell" reports this as 0.73%)
- 2009: 2.53% (Progresar, "Information for GiveWell" reports this as 2.02%)
- 2010 (as of June 30): 2.56%
Number of renegotiated loans:
- 2004: not listed
- 2005: not listed
- 2006: not listed
- 2007: not listed
- 2008: 0
- 2009: 0
- 9. Progresar, "Information for GiveWell," Pg 2.
- 10. "For the next year we estimate we will need US$26,000 to cover expenses which will not be yet covered by interest return and US$75,000 to increase our portfolio and get near our break even point." Progresar, "Information for GiveWell," Pg 3.