Founded in 1952, CHF International (CHF) has worked in over 100 countries and currently operates in more than 25 nations. CHF’s mission is to serve as a catalyst for long-lasting positive change in low- and moderate-income communities around the world, helping people improve their social, economic, and environmental conditions. One component of fulfilling that mission has been improving access to financial services. In the last five years, CHF International has disbursed over 200,000 loans totaling more than USD 482 million and has a particular niche in establishing microfinance programs in conflict, post-conflict, and post-disaster settings. CHF currently oversees lending operations in 11 countries across Africa, Asia, Europe, Latin America, and the Middle East. As of June 2009, CHF International had assets under management of over USD 200 million (microfinance portfolio outstanding of USD 107.6 million plus middle market portfolio outstanding of USD 93.5 million).
Elissa McCarter, Director of the Office of Development Finance that oversees Microfinance, SME and Housing Finance Initiatives at CHF International (CHF)
MicroCapital: First of all, can you tell us why CHF has chosen to focus on development finance particularly in conflict and post conflict areas?
Elissa McCarter: I think it’s been an evolution of where we have come as a development actor in various countries. Our mission is to be a catalyst for long lasting positive change and we implement a number of different activities depending on what that means in communities where we work – based on a social, environmental and financial considerations and where we can have the greatest impact. A great deal of our work has traditionally been largely funded by the U.S. government, and a lot of U.S. priority funding was in severely nascent markets, particularly in post conflict environments. We were able to prove our ability and establish a track record in working in those environments early on, both in our general economic development activities, as well as our microfinance or development finance activities.
MC: What services does the Development Finance Group at CHF International provide?
Elissa McCarter: We refer to our micro-lending activities as development finance to reflect the broad range of business models and products that we provide. We serve the very typical small microfinance borrower (average loan size of USD 1000 to USD 2000 dollars) up to what we consider to be the missing middle market — where banks have been slow to step in. Our middle market portfolio, in terms of loan sizes, ranges from USD 200,000 dollars, all the way up to USD 5 million in some places. Housing has always been one of the niche areas we have worked in, since the 1970s when we pioneered some of the first housing microfinance programs.
MC: CHFs has stated that its international lending activities are successful because of the firm’s approach to “development finance” that is demand-driven. Can you elaborate?
Elissa McCarter: I think any successful development project including setting up a microfinance institution has to be based on really good market research to define the customers or the communities that you are trying to serve. From our very beginnings in CHF we have used a methodology called PACE (Participatory Action for Community Enhancement). It’s a grassroots approach to getting community buy-in and making sure every project is demand-driven from the start. That is also our approach to providing financial services – we base our program or products on what is needed in the markets. I think one of the strengths that CHF has been able to bring is really looking at what’s our value add in a marketplace — where we can bring commercial bank partners in at the very beginning, where we can look at building up existing markets or partnering with different actors in those markets (ie moving domestic private capital down market). We don’t have a particular lending model that we always replicate. It’s very much tailored to the country or even the community that we start in. That is one of the reasons we have such a variety of different types of lending activities. Our programs include: being an intermediary for a guarantee program working with private commercial banks; setting up a joint venture microfinance company with private commercial banks; directly establishing and operating greenfield MFIs. These all illustrate programs which are designed based on local context when we start and the evolution of the market that we are trying to serve.
MC: What is the story behind CHF with regards development finance and its founding? Specifically, what was the vision for CHF in the beginning and how has that vision evolved?
Elissa McCarter: CHF International was originally established as the Foundation for Cooperative Housing in 1952 to help low- and moderate- income families in America achieve improved economic standing and quality of life through the construction of affordable housing. We sponsored over 60,000 units of cooperative housing in 35 states across the US. In 1962, USAID invited us to apply our experience on an international level, first in Central America, and since then we’ve gradually evolved and expanded into the multi-sector humanitarian aid and development organization now solely focused on international issues. Because of our roots in housing, we got into microfinance through some of our early programs in home improvement lending in Latin America in partnership with local credit unions and cooperatives. Some of that early learning ended up with CHF piloting its own programs in home improvement lending that led to taking that model to other places in the world (Middle East and Eastern Europe). Like others in this field, we’ve evolved as the microfinance industry has evolved, taking a more business minded approach and shifting from establishing credit programs to building institutions that can achieve long-term sustainability. So we first started with the ‘housing angle’ and realized that if we are going to look long term, we needed a stronger focus on commercial sustainability — and diversification of products and institutional models — to achieve this and stay relevant.
By Zoran Stanisljevic
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