Tanzania: Agriculture-specific loans help Tanzanian smallholders increase their productivity
Madaba / Mafinga, Tanzania – Small agricultural loans, disbursed via mobile phones and targeting specific agricultural activities at different stages of production, have more than doubled the food productivity of thousands of smallholder farmers in southern and central Tanzania over the past three years, improving their livelihoods.
IPS toured the region this month and spoke to many farmers who testified about how the new form of village-specific controlled loans resulted in a successful harvest.
One such farmer is Peter Lulandala, a small farmer from Iringa province in central Tanzania.
Lulandala manages a loan of one million TZS ($ 312) which he borrowed from a local community bank. The problem was that once the money was paid to him all at once, he was unable to keep the funds for the different phases of farming.
“We could borrow money, which was usually given in one lot, mainly during the planting season. For most of us, it was extremely difficult to keep some of the money in our homes or in personal bank accounts just to wait for the weeding or harvest season.
“As smallholder farmers in the villages, we have a lot of urgent things that always need money. For example, it will be very difficult to see my children go to bed for the second day in a row without food and yet I have money under my pillow. or in my personal account, ”Lulandala told IPS.
That was until three years ago when an innovative new money lending product became available in his village. With the new model, smallholder farmers belonging to particular groups (such as groups of farmers or residing in certain villages) should save money at a targeted financial institution before borrowing three times their savings.
“This is an innovative product that was presented to us by the Alliance for as Green Revolution in Africa in collaboration with the Small Entrepreneurs Loan Facility (SELF) project to help smallholder farmers access agricultural finance and to help them use the money for their intended purpose, ”said Khassim Masengo, director of the Mahanje Savings and Credit Co-operative Society (SACCOS) in Madaba district, Ruvuma province, southern Tanzania.
The farmers are guaranteed by two signatures of the other members of the group. What differentiates the SACCOS loan is that once the loan is approved, the farmer can only access it in stages.
“We are disbursing it in three phases so that farmers can only access what they need during the planting season, then the second disbursement can only be released at the right time for weeding and top dressing,” and finally the last payment is for harvest and post-harvest handling, ”Masengo told IPS.
Lulandala said the new loan structure worked for him.
“But since this particular money is kept by the bank and with an agreement on how it will be disbursed, I will always look for an alternative way to feed my children while the money waits for the intended purpose,” said the native farmer. from Itengulinyi Village, 15 kilometers from the main road that connects the towns of Makambako and Iringa.
Farmers are expected to repay loans after harvest.
“Once they have harvested, we encourage them to keep their produce in particular warehouses, and based on the warehouse receipts, we can give them personal loans worth half of their production for one. immediate home use or an additional investment while waiting for better prices, ”explained Masengo.
According to Hedwig Siewertsen, head of inclusive finance at AGRA, many small African farmers fail to reach their full potential because they lack access to agricultural finance.
She said that unless the farmers had collateral to show they can repay their loans, the banks would not lend to them. Siewertsen noted that there was a need to find innovative ways to enable small farmers to access agricultural finance without necessarily offering collateral.
“Our main objective is to improve the quality, cost-effectiveness, access and impact of financial and agro-industrial products and services for smallholder farmers in Africa,” said Siewertsen.
According to the Food Sustainability Index (FSI), created by the Barilla Center for Food and Nutrition (BCFN) and the Economist Intelligence Unit, increasing food productivity is vital, given population growth and intensifying food supply. climate change. And this, according to the report, can only be achieved through new innovations.
He also notes that sustainable agriculture needs financing, which is particularly difficult in developing countries.
“It can be difficult to channel investor money, especially for developing countries. In the ISF, the top ten countries most likely to attract investment in sustainable agriculture are all European, except the United States and Israel. And while most of the countries in the index offer some form of public funding for agricultural innovation, 12 countries – including nine in sub-Saharan Africa – do not, ”the report notes. .
Unlike the MUCOBA bank, which works with farmers in small groups of 10 to 15 members, Mahanje SACCOS works with villages. This means that SACCOS offers are specific to the members of these villages and also allow easy traceability and service delivery.
It also gives SACCOS security as they are able to engage borrowers in person and from home.
“For a person to qualify for an agricultural loan from this SACCOS, the first condition is that he must be descended from one of the eight targeted villages, and this must be confirmed by the village elder of that particular village. “said Masengo.
“The main reason is that we have to work with farmers who are well known to the villagers and who we can access for extension services,” he said.
So far, 2,847 members of Mahanje SACCOS, including 892 women farmers from neighboring villages of Mahanje, Madaba, Lituta, Mtepa, Magingo, Mkongotema, Lukira and Kipingo in Madaba district, Ruvuma province, Tanzania, have become net corn producers. and beans over the past three years. They are now able to export their products to neighboring districts.
SACCOS has since been converted into a fully-fledged bank registered by the Central Bank of Tanzania and offers credit and savings services, but specifically to farmers in the eight target villages.
However, MUCOBA Bank, which is a community bank headquartered in the town of Mafinga in central Tanzania, covers a larger area and targets smallholder farmers in remote areas that do not have good infrastructural access to infrastructure. urban centers. It currently has around fifty member farmer groups.
“Our bank has agents who are also our agricultural extension agents in the field that we use to register farmers through farmer groups and then send information to us via the Internet,” Philipo Raymond, managing director of MUCOBA bank.
With MUCOBA bank, eligible farmers then receive their money through mobile phones and once they harvest they can repay their loans through the same digital channel.
With the two institutions, farmers were able to borrow as little as TZS 200,000 ($ 87) or TZS 15 million ($ 6,520).
“In addition to receiving the sums of money in batches to meet specific needs, the use of the M-Pesa payment made it easier for us because we do not have to travel to the city, and we have reduced the risk of carrying cash in our pockets, ”Emanik Mgwiranga, chairman of the Nguvu Kazi Itengulinyi farmer group from Itengulinyi village, 44 kilometers from the nearest town, Mafinga, told IPS.
The main crops are corn, beans and rice, but some farmers also include Irish potatoes.
In addition, Mahanje SACCOS introduced indigenous poultry farming to protect farmers when farming seasons fail or when market prices for their products are still low.