Agricultural credit card innovation: the case of Financiera Trisán
This paper describes and analyses a program that extends credit cards to agricultural input suppliers and rural producers in Costa Rica. The authors aimed to determine whether the program is financially viable and if it could be replicated in other rural areas of Latin America. A credit card program is innovative and unusual for a rural setting. Normally, credit cards have been promoted in urban areas with business firms and salaried employees who have steady cash flows. Credit cards in rural areas are not as common because potential clients, especially agricultural producers, have more seasonal and uncertain monthly cash flows.
The paper recounts the genesis of the agricultural credit card program which was driven by Financiera Trisán’s desire to lower transaction costs, increase credit sales volume and resolve a legal conflict with the Superintendency. Credit card holders have a borrowing limit set according to repayment capacity and cards carry a market rate of interest. Individual clients are typically medium-sized, commercially oreinted farmers and are primarily male. The credit card products contitute nearly 75% of Financiera Trisán’s assets and the organisation has generated a consistent positive profit margin. The paper concludes with a review of challenges facing the expansion and replication of the product, notably issues relating to credit bureaus, the postal service, computer technology and connectivity and delinquency control.
The authors conclude that the credit card product could be established in other areas of Latin America if the following conditions hold:
- a density of rural clients with variable but predictable cash flows;
- a minimum level of functioning physical infrastructure – telecommunications, electricity, postal services, roads;
- an appropriate legal and financial regulatory infrastructure that permits profitable intermediation;
- a profit-oriented, client-driven service provider with a history of active participation in the rural sector.