Strong financial cooperative contributes to financial inclusion in rural Albania

A growing population, changing food patterns, and sustainable production within planetary boundaries necessitates a transformation of global food systems. Governments, households, agribusinesses and SMEs in emerging markets however lack the means to invest in such transformation. The possibility to transfer money, save or get loans is crucial for personal growth and rural and business development.

From Rabobank’s mission to Grow a Better World Together, Rabo Partnerships contributes to this transformation by addressing issues that matter for the future – such as financial inclusion, rural development and agrifinance. In Albania, Rabo Partnerships has been working together with FED invest, the largest financial institution operating in rural Albania since 2016, assisting the transformation process as the Albanian Savings and Credit Unions (ASCUs) consolidated into the strong cooperative financial institution that FED is today.

In terms of financial inclusion, Albania has made good progress over the past decade, but still has some big challenges to overcome. This is especially true when it comes to financial inclusion in the rural areas. Banks focus on urban areas, which leaves the rural areas to cooperative and microfinance institutions. As in most developing economies, the agricultural sector, and rural economy more generally, is underserved by financial institutions in Albania, especially on the lending side.

These decade-long challenges make the great results achieved by FED invest (and before it, the ASCUs) serving the rural economy through financial services even more impressive. FED invest has grown into a trusted partner and growth promoter in rural areas and showed that the cooperative has the ambition and potential to make a difference through financial inclusion. Zana Konini, Chairman of FED invest’s managing council, takes us back to the beginning: “A highly fragmented infrastructure and very limited product offering were impeding ASCU to scale up its operations and become the robust financial partner to strengthen financial inclusion among rural borrowers. The large scale technical assistance project addressed these issues by professionalizing ASCU’s structure and business processes. Today, FED invest is a successful financial cooperative model with customer centricity in its DNA, counting over 82 thousand members.”

FED invest is the largest financial institution operating in rural Albania on a national level, rather than serving only certain regions of the country. In November 2016, Rabo Partnerships initiated its relationship with FED invest in the form of a Public Private Partnership (PPP) connecting FED invest, EFSE (European Fund for Southeast Europe), the Dutch Government and Rabo Partnerships. Rabo Partnerships provided technical assistance across a number of challenging areas, playing a vital role in the licensing and transformation process of FED invest.

“With our partners’ support, FED invest outlined a mid-term roadmap and drafted a strategic business plan with clear KPIs. We have significantly enhanced our corporate governance framework, transformed our IT architecture, developed agri and SME sector offerings, operations, refurbished 95% of branches, received a Payment License, rolled out new value propositions to our members, embarked on several digital initiatives, introduced digital channels, overhauled our risk framework and financial reporting. Since the onset of this project, FED membership has more than doubled, female members more than tripled, deposit portfolio increased by nearly 70%, loans by 55%, profitability and capital ratios have significantly improved. And all while staying true to the social mission of FED Invest”, explains Merita Cani, Member of the Managing Council and Director of Strategic Projects.

Some of the most important achievements of the partnership include the establishment of a core banking system upon which new products and services can be built, and the successful lobbying for regulatory change in Albania. At the beginning of the partnership, FED invest had no core banking system in place. Over the course of the four-year period 2016-2019, considerable collaborative effort was spent on setting up a system. This core banking system, called FlexCube, was successfully launched in January 2020. “All business processes in the branches and the head office were completely redesigned, while IT policies and governance are significantly enhanced”, says Liliana Nanaj, Chief Operations and IT Officer. FED invest is now ahead of its competitors in the microfinance sector, and on par with the banking sector when it comes to the core banking system.

The partnership with Rabo Partnerships has also enabled FED invest to successfully obtain a payments license from the Bank of Albania in 2016, enabling FED to become even more relevant for its members, and establish a foundation for future services using digital channels. Furthermore, FED invest successfully lobbied for regulatory change in the microfinance sector. FED invest lobbied the Central Bank of Albania and got approval to be covered under the Albanian deposit insurance scheme in 2017, thus increasing its members’ confidence. The deposit insurance covers deposits up to 2 million, meaning that it insures 95% of FED invest’s depositors. In addition, with this step FED invest paved the way for other credit and savings associations to be covered under the scheme too. These achievements show the determination and ambition of an organisation that is both very young but also rich in history.

FED invest is offering more and more banking services: “Current accounts, member to member payments and internet banking have been successfully launched and utility payments are ready for launch in the coming month. Further preparations are underway to support digital payment services”, explains Mrs. Nanaj. The cooperative has over 79.000 registered members throughout the rural region, making it a market leader. The majority of FED invest’s members are farmer households that earn their income from primary agriculture, with a second significant portion consisting of micro, small and medium enterprises.

The key advantage of Rabo Partnerships in the cooperation with FED invest is Rabobank’s cultural affinity, given the common origins of the two institutions in the cooperative movement. The FED invest culture is very much focused on teamwork and extensive direct contact with clients who are also members. Customer centricity is intrinsic to the nature and part of the DNA of FED invest – a way of working that fits Rabo Partnerships very well, given its roots in Rabobank. The partnership with Rabo Partnerships has enabled FED invest to convert itself from a federation into a cooperative structure with strong governance, and Rabo Partnerships was uniquely positioned to support FED invest along this transformation journey.

Rabo Partnerships and FED invest have extended their collaboration within the Public Private Partnership framework for another three years and look forward to working together in the months and years to come to ensure FED invest’s members are offered even more diverse and modern services. “The new project will build on the foundations and achievements of the previous years”, says Perlat Sulaj, CEO of FED invest. “Aware of the challenges ahead and the institution’s responsibilities towards its members, FED invest will continue to expand the scale and forms of intervention, enhancing performance and financial sustainability, delivering on value chain finance, digital financial and non-financial solutions to members, promotion of SME entrepreneurship and agricultural expertise.”