BACKGROUND

The Latin American Development Fund (FOLADE), was founded in 1993 as an initiative of The Latin American Association of Promotion Organizations (ALOP). However, since its beginnings it has worked as an autonomous trust of NGOs --of all Latin American countries-- that are interested in finding novel financial mechanisms for development and reaching higher self-sufficiency levels.

FOLADE originally grouped 14 organizations from 13 countries of the region. To date, its membership has increased considerably: organizations with a solid career and wide experience in technical cooperation and the provision of financial services for the social economy, (small and micro-businesses, and the building of social infrastructure), have joined the trust.

JUSTIFICATION

The deep transformations that have recently taken place in the geopolitical sphere have affected the Latin American economic and social environment, and particularly the field of international cooperation.

As a result of such changes:

• The areas of interest have been redefined
• New geographical and thematic priorities have been established
• Latin America has been relegated in terms of international cooperation
• There is a notable tendency to favour multilateral cooperation entities to channel financial resources.

In the face of this panorama, new types of responses are being developed; new systems to secure financing are surfacing, and there are changes that may be observed regarding cooperation and the financial criteria used by multilateral organizations. The cases of canalization of resources from such entities --through local NGOs-- to predetermined projects are no longer the exception. Yet the relationships between multilateral organizations and NGOs are mediated through complex and expensive negotiations, and a series of technical conditions and regulations to which NGOs are not used to.

This is precisely one of FOLADE's main challenges: to help fill in the institutional gap existing between the new financial resources and the NGOs working with the excluded sectors of the population throughout the region.

There have been also substantial modifications in the economic activities of the excluded sectors of the Latin American population with which NGOs work. For instance, a group of small producers and micro business that are now in conditions to operate with reimbursable capital, has been consolidated. In other words, this group is now able to run into debt, but has no access to the conventional financial system.

In response to these realities, the NGOs have established a series of mechanisms to provide credit and other financial services to such a segment of the population. However, this mechanisms must be modernised, the volume of resources must be widened, and they have to open a new variety of services that respond effectively to the needs of these productive groups.

This is another important challenge accepted by FOLADE: to support the consolidation and modernization of financial specialised mechanisms to work with that segment of the economy that makes up the basis of any strategy of an equal, sustainable modernization process.

MISSION AND LINES OF ACTION

FOLADE's mission is to provide technical and financial services to entities working in the various Latin American countries with the excluded social sectors, which have no access to conventional financial schemes. The organization then hopes to make a contribution to the institutional modernization and consolidation of such entities.

Its strategic lines of action are:

• To build regional financial mechanisms of mediation that are capable of efficiently channelling resources coming from various cooperation and investment sources. Such mediation will be carried out by designing new training systems and providing financial resources to help the target population.
• To create an agile system of communication, exchange of experiences, training, technical assistance and other ways of mobilizing institutional resources. In doing so it will contribute to generate -- throughout the different Latin American countries-- efficient and differentiated systems that are capable of operating in the open financial market while attending the needs of the region's popular economy.
• To establish a strategic coalition --with ALOP and other instances of civil society-- in order to have a more effective influence concerning cooperation policies, and therefore be able to properly mobilize resources toward Latin American NGOs.

STRATEGY AND SERVICES

FOLADE bases its strategy on the advantages offered by the presence of its affiliates throughout the region, which allows it to operate in a descentralized manner. Because FOLADE has its roots in Latin American NGOs, it has first-hand knowledge of the institutions which it serves and a unique capacity to mobilize their existing technical resources.

At the same time, the scale of FOLADE's operations and the fact that it is a regional organization enable it to obtain and mobilize resources efficiently from international and multilateral cooperation and investment sources. The process of securing and mobilizing resources is achieved by establishing strategic alliances and promoting resource leverage mechanisms.

FOLADE offers the following services to its affiliates and all organizations which qualify as users:

• Seed Fund: This Fund is set up in alliance with other financial bodies and development cooperation agencies. It offers financial support (equity-capital participation and loans) as well as technical cooperation resources to facilitate the constitution and consolidation of regulated financial bodies linked to NGOs, which specialize in providing financial services to small producers and micro business.

• Guarantee Funds: These funds are set up with the participation of banks and international guarantee funds. They offer guarantees to financial mechanisms linked to NGOs, enabling them to seek resources from non-traditional funding sources, or to conduct fund-raising operations based on the issue of bonds which are backed by the fund.

• Trustee Services: Administration of assets and funds for regional development cooperation programmes and projects, as well as the administration of investments of affiliates and other users in the international stock markets.

• Information Services, Training and Technical Assistance: These services are aimed at the institutional strengthening of organizations which provide financial services to initiatives of the social economy, in order to enhance their quality and efficiency.

• FIAR: Facility for Self-Financing Initiatives and Reconversion of NGOs. FIAR offers loans, promissory notes, guarantee arrangements, and equity-capital investment to back economic initiatives and the processes of transformation within these organizations.

ORGANIZATIONAL STRUCTURE

FOLADE operates as an association based in Costa Rica. The main components of its organ izational structure are:

• The General Assembly, which includes all members
• The Comptroller
• The Board of Directors, constituted by the President, the Vice-President, the Secretary, the Treasurer and the Member-at-Large
• The Executive Body, comprising the Executive Director, the Financial Director and the Director of Information, Training and Technical Assistance. The Executive Body is supported by the necessary technical information and administrative staff to ensure the efficient accomplishment of its functions.
• The Consultative Council, made up of individuals who have extensive experience in the field of development cooperation and in the provision of financial services to the excluded social sectors.
• External Audit.

FOLADE is the owner of CORFOLADE, a corporation registered in Panama. It offers facilities for financial and administrative operations, which because of their character are more easily undertaken by an entity with a corporate legal status and structure.

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