Rural savings banks in honduras: overview and functionality

What Are Rural Savings Banks?

In Honduras, rural savings banks were established as part of a comprehensive rural financing system under the Law of Modernization and Development of the Agricultural Sector (Special Law of Rural Savings and Credit Banks, Decree 201-93).

Rubén Núñez, regional coordinator at IHCAFE in Comayagua, explains that rural savings banks are basic structures tailored to the realities of rural coffee-growing areas. In these regions, groups of producers come together to organize and access dynamic economic opportunities and community-based projects that benefit both members and the local community. Núñez notes that “most projects targeting coffee-growing areas rely on this basic structure to develop community initiatives, as it offers a way to reach small producers who are often excluded from the formal financial system due to a lack of property documents.” Once legally recognized, rural savings banks allow members to access credit, offering a solution to the financial challenges many producers face.

In summary, according to Núñez, a rural savings bank is “a structure with various channels through which actions can be directed to benefit communities.” Since 2008, rural savings banks have been viewed as an alternative to cooperatives in coffee-growing regions. Through a system of equal shares among members, these institutions not only serve as savings and credit entities but also play a key role in local development projects.

Núñez further explains that, in the past, members would primarily save money and take out loans, creating a cycle that lacked significant growth. To address this, IHCAFE introduced development projects, such as small coffee processing facilities, enabling members to collectively market their coffee, create jobs, and improve commercial opportunities.

Lorving Calderón, a producer, taster, barista, exporter, SCA instructor, and quality manager at the micro-enterprise Industria Mi Tazita, describes rural savings banks as “a small bank for producers in villages or municipalities, where there is less bureaucracy to become a member or access credit quickly, with lower interest rates compared to banks or loan sharks.”

According to Calderón, rural savings banks offer an effective solution for producers because they are run by other producers who understand the real needs of the coffee sector.

What Services Do These Community Organizations Provide?

These community organizations, formed by members of a community to access savings and financing services, are distinguished by deep relationships of trust, solidarity, and mutual respect among their members. Their mission is to improve the quality of life for all participants.

Among their key benefits are strengthening the local economy, facilitating access to credit within the community, and building social capital.

Koritza Guzmán, president of the Café 1603 rural savings and credit bank, explains that their organization, located in the village of Los Pinos, Santa Bárbara, was established on October 29, 2015, and currently has 22 members. She notes that their rural bank is small, built on close ties within the community. As a group, trust and solidarity are essential.

According to Koritza, some of the financial services provided by rural savings banks include offering credit, approving loans, and promoting savings.

Additionally, Café 1603 has partnered with various NGOs to organize training sessions and field schools for its members. These field schools provide support on topics such as farm management, seed selection, nursery management, disease control, and even the selection of coffee beans for selling specialty lots.

In terms of commercialization, Koritza highlights that “some of our members have managed to sell their coffee lots at a good price because we’ve established agreements with exporters like Olam Honduras (now ofi Honduras), which has helped us secure better prices compared to the regular market rates.”

In 2017 and 20, they participated in a specialty coffee fair in Boston and were able to send samples of their coffee, which, although they didn’t find new buyers, was a significant achievement for them. Locally, they have also taken part in fairs held in the coffee-growing departments of Copán and Santa Bárbara.

Regarding sustainability, a partnership with a private hydroelectric company has allowed them to reforest the farms of all members with timber-yielding trees and protect water sources. Economically, through an NGO, they received funding for entrepreneurs, with 13 of the 22 members benefiting from seed capital.

Koritza emphasizes that “at an individual level, it wouldn’t have been possible to access all these benefits, because the organization works collectively. An individual requesting all these things wouldn’t have the necessary support.”

Lorving adds that, when it comes to supplies, access to fertilizers is improved because “it’s different when a single producer buys compared to a group purchasing together. By buying in bulk, they get lower prices and can buy on credit or pay with the next harvest.”

Rubén also notes that one of the greatest advantages is the ability to develop projects that attract support from cooperating organizations. He shares experiences with rural savings banks that have established centralized processing facilities, allowing for better quality control and reduced environmental impact. Being part of a rural savings bank also opens doors to markets offering premium coffee prices, which would be difficult to access individually.

How Can Coffee Farmers Access Rural Savings Banks?

To establish a rural savings bank, Koritza points out that it is necessary to have more than 10 members, a small amount of capital to open an account, and no existing organization of the same type within the community. Members, on their part, cannot be part of two organizations simultaneously, must have no criminal record, and should be trustworthy individuals. Additionally, while the requirement is to be of legal age, their rural savings bank is inclusive and supports youth, allowing individuals under 24 years old to join.

Lorving emphasizes that “joining a rural savings bank is straightforward. An application is filled out during a rural bank meeting, and each month, the board reviews and approves or denies the application. Members need to meet certain requirements to enjoy the benefits, which include making contributions, being responsible, and punctual.”

Rubén adds that within the group looking to organize, there are basic requirements, such as the desire to work collaboratively. Moreover, access is not limited to producers; anyone interested can become a member of the rural savings banks.

What Impact Do They Have on the Coffee Industry in Honduras?

Rubén notes that the rural savings banks help to “address the rural economy, enabling producers to access credit, which adds dynamism to their operations. The trust built from cooperating organizations or projects supporting a structured approach, rather than direct assistance to individual producers, creates a socioeconomic impact in well-organized communities.”

“Producers understand the need to organize themselves to enhance the local economy. There is a need for personnel to guide producers. We at IHCAFE can provide some of this service, but currently, we lack specialized staff to offer these guidelines to producers. Other entities operate in this area, but the number of available personnel is quite limited,” he states.

Koritza adds that “community organizations are very beneficial. I encourage and challenge everyone to form their own organizations to improve living conditions because it is difficult to advance or create better circumstances without being organized. Many institutions offer support, and what’s most important is not just what is received, but how to take advantage of opportunities to implement changes at home with their families. This way, everyone has the knowledge at hand to apply it effectively.”

Lorving believes that rural savings banks positively impact the sector by solving producers’ problems. “They contribute significantly to the industry because they act as small banks for producers. There is no set schedule for disbursements, nor do they have to follow the same protocols as traditional financial systems. I feel that they offer a lot to the coffee sector because these types of banks can provide better assistance to producers.”

However, rural savings banks in Honduras are geographically limited. This restriction can hinder their potential for success and growth; nonetheless, it is essential to acknowledge the valuable work they do and the contributions they make to their communities.

The effectiveness of these community organizations largely depends on their administration and the technical assistance available to their members. Overall, their positive impact highlights them as a viable option for coffee producers.