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History

For over twenty five years, PIAD has been striving for the advancement of disadvantaged people in the Department of Cochabamba in Bolivia. More specifically, PIAD works in the municipality of Pocono in the third section of the province of Carrasco in the Department of Cochabamba. Despite turbulent times, including political strife, hyperinflation, prolonged drought, and organization cutbacks and restructuring, PIAD has managed to maintain stability and continues to follow its original organizational goals. The PIAD’s history can be clearly differentiated into three stages:

First Phase: Involves the creation of PIAD as a project executive unit under the direction of CORDECO (Regional Development Corporation of Cochabamba) as well as other participating National organizations. It includes the management between 1981 to 1994 as a state-run entity and the execution of an agreement for non-refundable financing in the amount of $595,000 USD from the Inter-American Development Bank.

Second Phase: 1994-2004. This phase involves PIAD’s transformation into a non-profit NGO. Their goal was to become economically and financially self-sufficient in order to receive a second financing from IDB for a non-refundable $500,000 USD of which only $400,000 was delivered.

Third Phase: Following the experiences of the previous phases, the organization underwent a reconstruction during which strong decisions were made by the new management concerning its remaining scarce resources. This reconstruction was based on the premise of achieving self-sufficiency or financial equilibrium to continue its credit activities.

Phase I: 1981-1988

PIAD was created as an executive unit by means of an inter-institutional agreement in Cochabamba, Bolivia on February 4, 1981 which consisted of the following institutions.

• CORDECO: Corporation for Regional Development of Cochabamba- was the institution with the most staff and representation in PIAD
• MRAM: Ministry of Rural and Agricultural Matters
• ABB: Agricultural Bank of Bolivia
• BI: Bolivian Insurance
• CBRP: Center for Botanical Research of Pairumani
• UMSS: University Mayor of San Simón
• BIT: Bolivian Institute of Technology
• IIAC: Inter-American Institute for Agricultural Cooperation

Among the personnel assigned to PIAD by the different institutions included investigators, technical specialist, and administrative and support personnel. During the first stage, PIAD had the funding and resources to serve more than 2,000 clients in 32 communities in the Department of Cochabamba. As an Executive Unit their function was to coordinate, execute, and promote activities by means of an agricultural credit program that lent farming supplies (seeds, fertilizers, tools and equipment) to small farmers that did not have access to conventional sources of credit. Financing for this program was provided by the organizations that made up PIAD, by contributions from the farmers, and by funding from PL 480 of USAID

1987 to 1993

During this period PIAD received support from the Inter-American Development Bank (IDB) to complete its outlined objectives of supporting small farmers in the form of supply credits, providing technical assistance during the production process, and offering advice in bringing products to market. Financing was made possible for this program thanks to an agreement between CORDECO and IDB in July of 1987 for $595,000 USD of which $395,000 was to be used for credits oriented towards financing work capital for small agricultural producers. The following table shows the expenses expressed in American dollars.

The anticipated goals of this financing program were to meet the needs of 360 beneficiaries in the form of credits, technical support, training, and the organization of farmers in 19 communities in the area of Pocona. PIAD assisted in the production of potatoes, corn on the cob, corn grain, wheat, barley, beans, and the introduction of fruit-bearing trees such as peach and apple. There existed a great demand from farmers in surrounding communities to be involved in this program, however, despite IDB’s investment, PIAD still lacked the economic and human resources to incorporate these groups. However, the organization suffered from many defaulted loans that would later have to be written off. This was due to the following:

• Credits were granted to very poor farmers that did not have any real guaranties
• Adverse Climate factors
• Lack of education, specifically knowledge about credit
• Credits were often used by political parties as gifts to attain support of the people

To view the financial history of PIAD click here(PDF archive)

Phase II: 1993 to Present

On July 14, 1993, after twelve years of continuous work, PIAD broke up its organizational structure and became a non-profit, non-governmental organization. It also ended its operations as a project executive unit under CORDECO in September 1994 returning all fixed assets (vehicles, computers, furniture, etc.) to the entities participating in PIAD, mainly CORDECO, including staff and technicians. Another reason that guided PIAD’s decision to convert was the opportunity to receive non-refundable financing from IDB under the condition that PIAD were a private civil entity or NGO and economically self-sufficient. Therefore, in May of 1995 PIAD and IDB subscribed the contract SP-SF-95-04-BO for technical cooperation and non refundable financing in the amount of $680,000. The following table shows the expenses expressed in American dollars.

Thanks to the assistance and funding of IDB, PIAD was able to continue its vital operations in serving the disadvantaged small agricultural producers of Cochabamba. PIAD also expanded its operations by branching into the microenterprise and small business sector in the city of Cochabamba. These loans proved to afford a more reliable rate of return for various reasons. First some of its urban clients were also clients that had moved to the city after having a successful relationship with PIAD in the past. Second, these clients often pay a mortgage on there home, car, or land that they can use to borrow against to acquire a loan from PIAD. Finally, urban clients are much easier to contact, such as he or she owns a phone, the PIAD office is more accessible, or a PIAD technician can easily visit numerous clients in one day.

Unfortunately during this period, various natural disasters (freeze, drought and earthquakes) transpired in some areas of Cochabamba which provoked the migration of its residents to other departments in the country as well as to other countries. Prolonged periods of freeze destroyed crops and many PIAD clients were unable to fulfill his or her financial obligations or left the credit program altogether. PIAD experienced the same negative effects that many microfinance institutions have faced from receiving purely donated funds and management continued to suffer from defaulted loans.

Phase III: 2004 to Present

By 2004 PIAD was dangerously close to bankruptcy and had been abandoned by the IDB due to its continual losses and poor management. Desperately in need of an adjustment in its institutional image, PIAD changed management in January of 2004. This new management, working using its own resources was able to salvage the organization by cutting back the agricultural loan profile and investing more in urban sectors, granting loans to more reliable agricultural clients. The agricultural loan profile has now begun to stabilize and PIAD has also been able to recover some antiquated debt from its clients in arrears.

One of the biggest difficulties that weigh heavy on the Program is without a doubt the profound presence of antiquated debt that was absorbed at the moment of its transformation to an NGO. This situation has become increasingly problematic to the point that the Program is not expected to reach institutional self-sufficiency, and is therefore unable to complete its long term financial obligations with BID that are further suffocating PIAD’s operations at this time.

Future

One of the objectives outlined in the new statutes is the diversification of the credit portfolio in such a way that the Program is now channeling with its own resources credits to the micro and small enterprise in the industrial, commercial, and artisan sectors in suburban areas of the city of Cochabamaba. When PIAD first began its work in this sector, only 2% of its portfolio consisted of periurban investment. Now, because their success and need to maintain operations, their current portfolio consists of more than 60% periurban and only 40% agriculture.

There are communities surrounding the areas currently serviced by the Program that demand agricultural credit, and being that no such institution exists that provides these services, the presence of PIAD in these communities would alleviate this demand to a great degree and would further strengthen the organization. However, economic restrictions impede the recovery of the zones lost due to natural disasters and obstruct the acquisition new communities in order to increase its areas of operation. Now with reliable management and a new institutional image, the organization is searching for national or international assistance to continue its work.