The Cooperative of Progress and Finance (CPF Ineza) managed to more than double its agri-lending through the development and introduction of multiple new, customized agri-credit product for farmers and farmer cooperatives. Since 2020 the SACCO managed to reach 540 farmers in Muhanga and Kamonyi districts with a total loan value of Rwf300 milllion, which were previously left unserved.
Being a SACCO with smallholder farmers as majority shareholders, CPF Ineza aimed to readjust its credit portfolio in such a way that it could serve the needs of its agri-base properly. 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 large portions of the rural economies but remained largely underserved in terms of access to finance. Rural SACCOs are well positioned to analyze the potential and the risks of these value chains, but the loan officers often lack the tools and know-how to match the demand with concrete financial products. The new agri-credit products of CPF Ineza have enabled the SACCO to successfully tap into this market opportunity.
Francois Kamanzi one of the farmers who took a loan and had bought for himself a bike Photo by Bertrand Byishimo
Needs assessment and interactive product design
CPF Ineza and Agriterra started the process with a needs assessment among the members of the SACCO, to identify the challenges affecting the agricultural sector in the respective rural areas and the need for finance.
Based on multiple member consultations, the team was able to organize interactive workshops with the loan officers and the key representatives of the SACCO to start designing financial products that fitted the identified needs and the strategy and risk profile of CPF Ineza.
By involving all relevant players in the SACCO, from loan officers, to the board of directors and other relevant members, CPF Ineza managed to develop six financial products targeting individual farmers and cooperatives in the value chains of cassava, coffee, rice, banana, maize and horticulture.
Each product is tailored to specific financial needs faced by growers of a given produce and those involved along the value chain.
"Agriterra approached us to discuss ways to develop the farmers in rural areas, and we came up with the financial products that they helped us to promote in order to increase market penetration,” says Chantal Uwamariya, the General Manager of CPF Ineza.
She added that since the initiation of the financial loan products, the uptake of loans by farmers increased from 12 to 30 percent in just two years. Individual farmers got the loans at an interest rate of 20 percent whereas those in cooperatives were charged at 18 percent.
Uwamariya also notes that the introduction of the new financial products did not only benefit the farmers, but asserts that the microfinance institution also registered interests.
Specific skills
Many financial institutions regard agriculture as a high-risk venture and prefer to allocate credit to other sectors. CPF Ineza has now experienced that the risk assessment was mainly based on a limited level of familiarity of the loan officers with the specific sectors.
Each agricultural value chain has its own dynamics, and loan officers need to be trained to get a basic understanding of the risks involved and the profitability potential of these activities. Having its operations within the district, close to the farmers, gives CPF Ineza the comparative advantage to be able to well understand the local dynamics and weather influences for each particular site.
Uwamariya said that the partnership with Agriterra has helped train their staff on Agri project analysis among other skills which has brought numerous advantages including reducing non-performing loans and cutting overhead expenses. "The newly-acquired skills helped us to serve our members better, while reducing the amount of non-performing loans (NPLs) on institutional level.
Syndicat Ingabo
The leading farmer organization in the southern province, Syndicat Ingabo, played an important role to unlock the selected value chains for agrifinancing through CPF Ineza. The syndicate put the topic on the agenda, mobilized its members to advocate for the topic, and was involved in the product design workshops. Especially cassava farmers emphasized the profitability potential of their crop if increased credit would become available.
Farmers upbeat
Alexia Mukamusoni is the president of Cooperative Ubumwe Mbuye (COUMB), which brings together 106 cassava farmers. She commends Agriterra’s initiative which she says has helped shore up their yields among other advantages. "Farmers used to miss certain seasons, because they did not have enough capital to by the inputs, but now all farmers are active all seasons and with a peace of mind because they know they will pay back after the harvest,” she said. Her cooperative took over 42 million in loans.
Francois Kamanzi, the president of COPEHOP, another fruit seedling suppliers’ cooperative also testifies to the provision of capital, and increase of productivity because of the loans.
"Preparing seedlings to supply to the market requires one year, and honestly you can’t spend a year without generating income, that is why these loans were needed to facilitate us during the preparatory season, and pay them back after selling,” he testified.
Since his cooperative requested for a loan, he asserts that the seedlings for sale increased from 15,000 per season to 45,000 and the workers hired also moved from 4 to 19 in a two-year time frame.
Another upbeat farmer who benefitted from this loan is Marcel Nsabimana, who says that these loans are very unique in the way they are borrowed. "We had tried to acquire other forms of loans from different financial institutions but we found that sometimes they imposed harsh conditions on us, changed the terms to which we agreed or provided less amount than requested, or even asked us to pay back before the harvest season,” said the 60-year old Nsabimana.