ADA Executive Director Discusses Innovative Finance Tools, Global Outreach

Chronicle.lu recently had the opportunity to interview Laura Foschi, Executive Director of Appui au développement autonome (ADA), a Luxembourg-based non-governmental organisation focused on enhancing the autonomy of vulnerable individuals through inclusive finance.

ADA strives to improve living conditions by providing tailored financial solutions and capacity-building programmes to those in need. With a mission to strengthen financial inclusion and support vulnerable populations, ADA has reportedly made significant strides in 2023, impacting over 186,000 beneficiaries across 55 countries. Their efforts include supporting young entrepreneurs, smallholder farmers and vulnerable households with innovative financial tools and capacity-building initiatives.

Chronicle.lu: You have mentioned the launch of the Financial Innovation Tool (FIT) as a significant achievement in 2023. Could you elaborate on the specific impact FIT has had so far in Senegal, Rwanda and Guatemala? What are plans for expanding its reach?

Laura Foschi: FIT supports organisations that stimulate independent economic activities with a high social and/or environmental impact, foster a spirit of innovation and create sustainable employment opportunities in developing countries. By 31 December 2023, the FIT portfolio was close to €950,000, spread across three investees in Senegal, Rwanda and Guatemala.

For example, the Women's Investment Club (WIC) in Senegal aims to give women-led startups and SMEs with potential for a positive social impact privileged access to modern financial instruments. In addition to providing capital from both individual and institutional investors, investees are provided with business coaching. FIT was the first commercial investor in WIC. Thanks to the loan, WIC can now expand its activities to Côte d’Ivoire and support additional businesses in Senegal.

Chronicle.lu: ADA has provided tailored financial services and training to thousands of smallholder farmers and forestry businesses over the years. Could you mention some examples (e.g. a farmer in Senegal who installed a solar-powered irrigation pump with a loan from an ADA-supported microfinance institution)? How does ADA measure the long-term impact of these interventions on both the economic stability and climate resilience of these communities?

Laura Foschi: ADA strives to improve the livelihoods of smallholder farmers and small-scale forest owners through increased resilience as well as facilitated access to markets and appropriate financial services. To this end, ADA connects value chain actors and provides technical assistance to promote sustainable agricultural and forestry practices. For example, a farming cooperative could be supported in implementing sustainable farming practices to obtain an organic farming certification. This certification enables the cooperative to sell the produce at a higher price, thereby increasing the income of both the cooperative (which can invest in better machinery and storage facilities, thereby becoming more efficient) and of the farmers (who can pay for their children’s health and education).

We regularly monitor how many beneficiaries are reached with our projects on a yearly basis. This is complemented with more detailed impact measurement by monitoring a sample group in the long term to understand the change to their livelihoods and ADA’s contribution thereto. This in-depth follow-up not only helps to understand the long-term impact of projects but also enables ADA and our partners in the field to improve via the lessons learnt.

Chronicle.lu: ADA has developed innovative financing mechanisms tailored to young entrepreneurs, such as long-term loans and revenue-based repayment schemes. What challenges have you encountered in implementing these solutions and how do you plan to scale these programmes to support more young entrepreneurs?

Laura Foschi: The main challenge with supporting young entrepreneurs around the world is that they mostly start managing their business informally, and they have no proof of their experience and their skills. In fact, they have no accounting records or proof of turnover which they could use to apply for a loan to grow their business. Without these records, financial institutions cannot estimate the business risk. Revenue-based loan repayments address these challenges as they enable flexible repayment amounts.

In terms of upscaling, we usually start with a small pilot project to test the adaptability of a solution to a specific local environment. If this is successful and our partners are comfortable with the implementation, we then roll out bigger projects to reach more entrepreneurs. This was the case with our partner Alterna in Guatemala, with whom we are now rolling out increasingly big projects to address the strong demand for small business funding in the region.

Chronicle.lu: Please discuss the strategies ADA uses to facilitate access to renewable energy, water and sanitation and ensure they are sustainable in the long term (especially in rural areas where infrastructure may be lacking).

Laura Foschi: In Senegal and Benin for example, ADA seeks to secure access to energy in rural areas by supporting solar mini-grid operators. ADA also helps the operators’ customers use the energy productively by promoting entrepreneurship through energy-efficient equipment and financial services.

This is a good example of ADA’s agile approach - we continuously test, improve and adapt our solutions to local needs. In this case, we initially aimed to provide access to energy for individuals but we then realised that the local grid operators needed businesses with larger energy needs as clients as well to be profitable in the long run. We need to be flexible and adaptable to ensure sustainability.

Chronicle.lu: You recently mentioned that the African Microfinance Week (SAM) in Togo was a major event for ADA in 2023. How does ADA plan to build on the momentum from this event to foster deeper collaboration and innovation in financial inclusion across Africa in the coming years?

Laura Foschi: We mainly host SAM for the benefit of the participants, not for ADA. SAM enables participants to network and to find partners to advance projects. We are basically strengthening the sector by bringing key actors together, which ultimately increases financial inclusion across Africa.

At the same time, the event enables ADA to keep abreast of key trends and to get a snapshot of the financial inclusion sector in Africa which helps us to adapt our ongoing programmes and develop new ones. For example, we are increasingly going beyond the provision of simple financial services in our programmes. This stems from the growth of other inclusive services in Africa which provide access to education and healthcare etc. These services are always linked to financial inclusion but in these cases, financial inclusion is a way of accessing other basic services instead of being an end in itself.

Chronicle.lu: What new initiatives or innovations can we expect from ADA in 2024 and for the future, especially in the areas of financial services and capacity building for vulnerable populations?

Laura Foschi: Climate change, gender issues and the use of digital technologies are taken into account in all of ADA’s activities. The consideration of climate risks is especially important for ensuring the sustainability of development policies and programmes. ADA will therefore ensure its activities have a low carbon footprint and will always strive to increase the resilience of the target population to climate change in addition to more specific programme objectives.

However, climate finance in itself is also an increasingly important topic for ADA. Our recently launched Inclusive Climate Finance Initiative (ICFI) strives to channel international climate funding and impact investment flows to the people who need it most. To this end, the supply of financing – especially from private impact investors – will be increased while climate adaptation projects will be put in place in developing countries to absorb the funding.