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In the first of our brand new series of Farming First TV interviews, Kanayo Nwanze, the President of the International Fund for Agricultural Development (IFAD), talks to Farming First about the extent to which helping smallholder farmers access bank loans can set them on their way to growing their businesses and securing their futures.
The initiative, launched in 2008, helps “the beneficiaries to grow their businesses so that they can own collateral and go into the mainstream banking system,” Nwanze explains.
AGRA and IFAD initially provided a 10 per cent risk-sharing fund in the form of a $5 million deposit that enabled Equity Bank to provide a 20 million loan project to small producers. The default rate was less than 1 percent, and the project then grew as more banks wanted to participate.
The impact of such projects can be transformative, affording even farmers of the smallest scale the opportunity to transition from microfinancing into the banking mainstream.
Nwanze describes meeting a woman farmer from Awassa, Ethiopia, who started with $100. “Within ten years, she’d been able to grow her business from one cow to seven cows including a heifer. She’d been able to buy land,”
Watch our video for the full interview with Kanayo Nwanze.
Improving access to credit is essential to allow farmers to invest and grow. The Grameen Foundation is one of the leader in the field of microfinance and its loans are changing women’s lives.
For example, in India, Ellevva and her husband, Durgiah, live in a small, one room house made of mud and sticks. Before taking a loan from SHARE, both worked as day laborers for meager wages (usually 20 rs per day for a woman and 40 rs per day for a man) and struggled to make ends meet.
With her first loan, Ellevva purchased a buffalo that recently gave birth to a calf. It will now produce milk that Ellevva can sell in the market. With a second “special” loan of 3000 rs, she purchased two goats and some vegetables. When she purchases vegetables, Ellevva sells some and grinds the pulses and dals into flour. Already thinking ahead to her next loan, Ellevva wants to purchase another buffalo.