Cooperatives Build Economic Power
How member-owned businesses in Guatemala and Peru are strengthening local economies
Every October for National Month of Cooperative Businesses, USAID celebrates how cooperatives and credit unions build inclusive economies and sustain the livelihoods of more than one billion members worldwide.
Unlike traditional businesses, cooperatives provide economic and social benefits to members, who organize organically and pool their risks and resources to achieve shared economic goals. Together, each member owns a share of the business and has a say in its direction. Guided by a set of principles, cooperatives drive sustainable economic growth for all people in a community, including women, youth, and other vulnerable groups.
USAID’s Cooperative Development Program (CDP) supports 350 locally owned cooperatives and credit unions across Africa, Asia, and Latin America by strengthening their market performance, governance, sustainability, and social inclusion. CDP-supported credit unions in Guatemala and an aspiring cooperative in Peru are developing national and local economies in meaningful ways.
In Guatemala, small- and medium-sized enterprises (SMEs) employ nearly 75% of the population and contribute to 40% of the country’s Gross Domestic Product (GDP). While credit unions are well-positioned to provide loans to SMEs, Guatemalan law prohibits them from doing so. As such, SMEs must instead look to traditional banks that may not be located in their communities for assistance.
Guatemala’s national credit union association, La Federación Nacional de Cooperativas de Ahorro y Crédito (FENACOAC), and 23 of its 25 member credit unions identified a way for credit unions to increase financial opportunity for Guatemalan SMEs under the current law. Together, the member credit unions mobilized $5.1 million in funding to create a separate entity known as a credit union service organization, or CUSO.
The CUSO, named CREDIPYME, is fully owned and operated by FENACOAC’s members who will receive back any revenue generated by the CUSO. To further strengthen its capacity to provide financial services to SMEs, CREDIPYME is leveraging technical support from the World Council of Credit Unions (WOCCU) and USAID’s CDP.
“The CUSO makes it legally possible to continue working with [SMEs], by helping them meet working capital needs, pay for operating expenses, and purchase assets and raw materials,” said Luis Perez, FENACOAC’s business coordinator.
“The business owners also have the comfort of knowing credit union professionals working in the cooperative spirit will continue paying attention to and safeguarding their financial needs,” he added.
Through this new entity, Guatemalan SMEs can now access FENACOAC’s loan portfolio, closing an $18 billion SME financing gap.
For the first time in the country’s history, credit unions can provide critical lending and business development services to SMEs, ensuring these major employers can reach their full potential as engines for economic growth.
Cooperatives act as incubators for SMEs at the community level, too. In Peru, a group of incarcerated women at the Women’s Penitentiary in Quillabamba are working together to form a cooperative.
“We are approximately 40 women and we have many things in common, such as we always wanted to give the best to our children. But we were wrong, trying to make easy money in the illicit drug trade,” said Cindy Quispe, an inmate at the prison.
Determined to provide for their families and build better lives for themselves, the women began producing chocolate under the name Dulce Esperanza, or “Sweet Hope.”
When Dulce Esperanza was first established, the women roasted cocoa beans over a campfire, husked them with their hands, and ground them using a single hand-operated mill. “We work hard thinking about the needs of our children. When we finally have the product, we must trust an intermediary and many times we are not paid,” explained Sofía Leon, a Dulce Esperanza chocolate artisan.
To overcome these challenges and become joint owners of their business, the women are working towards formalizing as a cooperative with support from NCBA CLUSA, USAID’s CDP, and local stakeholders, such as Peru’s National Penitentiary Institute, Ministry of Production, and National Commission for Development and Life without Drugs.
Through this partnership, Dulce Esperanza sold their chocolate at an international trade fair and teamed up with a regional cooperative association to scale production using their facilities as well as market their products at the association’s café in Cusco. Dulce Esperanza’s chocolate will also be sold online and in stores across Lima through a local retailer. To sustain this expansion, the women are learning to manage their finances, package and market products, and sustainably run a cooperative business.
As the world’s ninth largest cocoa exporter, exporting more than 45 metric tons of cocoa last year, Peru’s international chocolate reputation is promising for small producers like Dulce Esperanza. With favorable market conditions and the technical expertise, organizational knowledge, and networks needed to achieve its full potential, Dulce Esperanza hopes to increase their sales from 1,200 to 7,000 bars within the next year.
“A cooperative will allow us to spend more time working in our workshop, be able to generate money, and send something to our children — and also be able to continue working when we reach our freedom,” said another chocolate artisan, Joshelin León.
After their release from prison, some of the women will pursue artisanal chocolate production in their own communities, while those from Quillabamba will continue working with Dulce Esperanza.
About the Author
Kristina Evans is a Program Analyst for the Cooperative Development Program in USAID’s Local, Faith, and Transformative Partnerships Hub.
