MICRO-CREDIT

In order to meet needs of cash-strapped small-holders in areas where no banking facilities exist, BGF has entered into partnership with a specialist financial services provider, notably K-Rep Fedha Services Ltd. Fedha means money in KiSwahili. “Cash-strapped” actually is an understatement, in view of the acute poverty prevailing in the countryside, and no regular banks are willing to loan money to farmers that can’t produce collateral. Most farmers don’t even have a title deed to their land, although their ownership is recognised along traditional lines. Micro-credit, on the other hand, accepts peer pressure in organized and trainedgroups as a substitute for collateral, and is able to deal with poor people.

This company is specialised in management of Financial Services Associations (FSA), also called “Village Banks”. These are rural institutions based on membership, in which the members are holders of an account, and where they have become shareholders. As such, they are the owners of the FSA and are eligible to payment of dividend at the end of the financial year, in case of profits. The institutions offer credit at commercial interest rates, savings and money transaction services to their members. BGF provides for the complete costs of establishment of an FSA, until it can stand on its own, which amounts to a period of about three years. The first Village Bank was set up in Mbuvu Location, at the market of Kasten, end of 2012, with the objective to serve farmers in the wideneighbourhood. It was a glowing success. By 2016, membership was at 3200, the outstanding portfolio stood at 11.5m Ksh, 5000 loans were disbursed in that year and the net profit over the year was 0.7m Ksh. Not bad for a destitute neighbourhood.

A second Village bank was set up in Kamuwongo Location in June 2017, by the end of 2018 counting with 1700 members and a loan portfolio of 2.8m Ksh. The average loan size was 6,403Ksh. It is also on its way to sustainability through profit making for its own members/shareholders. In both cases, default is at a minimum. It is important to mention that membership to the Village Banks is not restricted to BGF partner-farmers, but open to all interested farmers.For non-Kenyans, also bear in mind that 1 US$ is equivalent to 100Ksh.

In Uganda, BGF looked at the different options available regarding micro-credit, and opted for a “revolving fund”, given to and operated by YICAFA (see “Northern Uganda Farmers Programme”) our local partner there.The money is principally used for stimulating cassava production, identified by YICAFA as a prime mover for food security & development of the area. The initial amount for the fund was disbursed in the very beginning of 2018, upon presentation by YICAFA of a programme proposal. To date, it continues well.

MICRO-CREDIT GALLERY