The Cooperative of Progress and Finance (CPF Ineza) has managed to more than double its agricultural loans through the development and introduction of several new personalized agricultural credit products for farmers and agricultural cooperatives. Since 2020, SACCO has successfully reached 540 farmers in Muhanga and Kamonyi districts with a total loan value of RWF 300 million, which were previously unserved. Being a SACCO with small farmers as majority shareholders, CPF Ineza aimed to readjust its credit portfolio so that it could properly meet the needs of its agrobase. With the support of the Dutch NGO Agriterra, six new financial products were designed, specifically for cassava, coffee, rice, banana, maize and horticulture farmers and cooperatives in the two districts.
These sectors represent a large part of rural economies but have remained largely underserved in terms of access to finance. Rural SACCOs are well placed to analyze the potential and risks of these value chains, but loan officers often lack the tools and know-how to match demand with concrete financial products. CPF Ineza’s new agro-credit products have enabled SACCO to successfully exploit this market opportunity.
Needs assessment and interactive product design
CPF Ineza and Agriterra started the process with a needs assessment among SACCO members, in order to identify the challenges affecting the agricultural sector in the respective rural areas and the need for financing. Based on the consultations of several members, the team was able to organize interactive workshops with loan officers and key SACCO representatives to start designing financial products tailored to the needs identified and to the strategy and risk profile. by CPF Ineza.
By involving all relevant stakeholders in SACCO, from loan officers to the board of directors and other relevant members, CPF Ineza has succeeded in developing six financial products targeting individual farmers and cooperatives in the value chains of cassava, coffee, rice, banana, corn and horticultural. Each product is tailored to the specific financial needs faced by producers of a given product and those involved throughout the value chain.
“Agriterra approached us to discuss ways to develop farmers in rural areas, and we offered the financial products that they helped us promote in order to increase market penetration,” says Chantal Uwamariya, Managing Director of CPF Ineza. She added that since the launch of the financial lending products, the use of loans by farmers has increased from 12 to 30 percent in just two years. Individual farmers got the loans at an interest rate of 20 percent while those of the cooperatives were charged at 18 percent. Uwamariya also notes that the introduction of the new financial products has not only benefited the farmers, but claims that the microfinance institution has also recorded interest.
Many financial institutions view agriculture as a high risk business and prefer to allocate credit to other sectors. CPF Ineza has now experienced that risk assessment is mainly based on a limited level of familiarity of loan officers with specific sectors. Each agricultural value chain has its own dynamic and loan officers must be trained to acquire a basic understanding of the risks involved and the potential for profitability of these activities. Having its operations in the district, close to farmers, gives CPF Ineza the comparative advantage of being able to fully understand the local dynamics and weather influences for each particular site. Uwamariya said the partnership with Agriterra has helped train their staff in Agri project analysis, among other skills, which has brought many benefits including reduced non-performing loans and reduced overhead costs. “The newly acquired skills have helped us to better serve our members, while reducing the amount of Non-Performing Loans (NPLs) at the institutional level.
The main farmers’ organization in the southern province, Syndicat Ingabo, has played an important role in unlocking the selected value chains for agricultural finance through the CPF Ineza. The union put the topic on the agenda, mobilized its members to advocate for the topic and participated in product design workshops. Cassava farmers in particular highlighted the potential for profitability of their crop if increased credit became available.
Alexia Mukamusoni is the president of the Ubumwe Mbuye Cooperative (COUMB), which brings together 106 cassava producers. She applauds Agriterra’s initiative which she says has helped boost their yields, among other benefits. “The farmers were missing some seasons because they did not have enough capital to buy the inputs, but now all the farmers are active all seasons and with peace of mind because they know they will pay back after the harvest”, she declared. His cooperative has taken out more than 42 million loans.
François Kamanzi, president of COPEHOP, another cooperative of fruit plant suppliers, also testifies to the contribution of capital, and the increase in productivity thanks to the loans. “Preparing the plants to supply the market takes a year, and honestly, you can’t go a year without generating income, which is why these loans were necessary to facilitate the preparatory season for us and pay them back after the sale,” he said. he declared. .
Since his co-op applied for a loan, he says plants for sale have gone from 15,000 per season to 45,000, and workers hired have also gone from 4 to 19 in two years.
Another optimistic farmer who has benefited from this loan is Marcel Nsabimana, who says these loans are very unique in the way they are borrowed. “We had tried to get other forms of loans from different financial institutions, but found that sometimes they put tough conditions on us, changed the conditions we agreed to or provided less than requested,” or even asked us to repay before harvest. season, ”said Nsabimana, 60.