Serving Malawi Farmers by Reducing Credit Risks for Agrodealers

CNFA established credit insurance in 2001 in Malawi to guarantee repayment of half of the money borrowed by agricultural input retailers to stock their shops.

This greatly expanded the number of rural distributors and decreased the distances farmers travelled to obtain inputs, sometimes quite dramatically, resulting in savings in both time and travel costs.

By 2005, retailers covered by the guarantees earned more than $1 million (plus a significant amount not underwritten by the credit insurance). Their success boosted local economies, raised Government tax receipts and increased the provision of non-agricultural services.

After the 2005 food crisis, the Government distributed seeds and fertilizers in order to prevent the situation from worsening. The 2006 maize crop rebounded significantly, but the impact on private-sector retailers was devastating: commercial sales of fertilizers slumped by 60-70 per cent.

A coalition engaged with the Government to transform the support programme into a private-public partnership. Retail sales have since recovered.