Rural finance story.


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It is a narration of what a typical rural finance project workday looks like. The story itself has lessons for those who want to try this field.

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Rural finance story.

  3. 3. 3One of the farms funded by Kabala Community Bank at Nyafrandor villageRural finance can be very useful tool when it comes to the fight against poverty in Africa and the generaldeveloping world. The field itself has so many challenges both for the practitioners and beneficiaries.Some years back, I accidentally found myself in this humble field and it seems to have become part ofme since then. This year, I work with a project run by International Fund for Agricultural development inSierra Leone. I am here as a Resident technical Advisor for Rural Finance and boy, life is not easy; youhave to encourage yourself here and there.Here we do Community Banking. In community banking the bank is owned by Community members whobuy shares in the bank. It mostly targets members of the same community it operates in for clients.Today, I came out of field work earlier than usual and so decided to share part of my yesterday’sexperience and some useful lessons albeit in a soft informal manner.Yesterday, I was out on field work. I was accompanied by a colleague by the name of Mr. Lansana whowas the one riding the new XL motor bike and I was his passenger. Here, we don’t prefer vehicles sincethey are not flexible enough for the terrain.We had to be on the field since if you have to run a successful rural finance or microfinance project youhave to do more fieldwork, it is a prerequisite. This increases the depth and outreach of your program.In other words it helps you increase how far you can reach clients and also the numbers of the clients. Itwill also help us keep a closer contact with the beneficiaries and better understand their needs.**After the long grueling journey cutting across some of the most traveler unfriendly areas of the fertileand hilly Koinadugu district in Northern Sierra Leone, we finally seemed to be coming to the end of ourjourney.
  4. 4. 4I could judge this because I could see that there were some signs of human interference with theelephant grass vegetation that was growing along the lone narrow path that we were using.The main purpose of this specific journey was to share experiences with members of a farming groupthat had finished repaying the first cycle of an agricultural loan which was actually lent to the group. Wealso wanted to see how we could do some sort of agricultural asset financing in future, given that wehad been toying with the idea for quite some time now. Basically we needed to test the idea that thetargeted group could borrow against their produce.Just around the curve we came to a small as in thin long concrete bridge that had old unpainted metallicrailings and an extremely rich ravine below that appeared to have rich riverine vegetation that wasgrowing alongside what might have been forbs or some sort of strange healthy grass. Peeping below Icould see two men who looked like were taking a well deserved cold afternoon swim in the river. Theyseemed to have recognized us, for one of them suddenly shouted “Hey Dixen, you are here!,” Honestly, Idid not recognize whoever it was, because during the time we was helping the loans officer in doing theappraisal for the farming loans, I had spoken to close to two hundred people on a one to one basis andsince I have a hog-like memory I just didn’t remember who that was. I only waved back from the back ofthe TVS bike that I was seated.Just after the second twist that was next to the bridge, a village appeared from the blue. “Ahaa..”, Irightly thought, ‘’ this must be Nyafrandor village”. Then Mr. Lansana whose was too preoccupied withriding, cleared his throat as was his usual habit, and then said to me, “Majumba” as everyone weworked with wrongly called me “This is the Kuranko village that we were coming to”Looking back, I could not believe we had managed to travel this far on bike. I gazed the deep rocky valleythat was besides us and then at the inner me and said to myself, “Despite the challenges that we hadfaced in this exercise we were now almost succeeding. We had given out farming loans and they had allbeen paid except for only one division which had received its loans late. In lending, late loans areunadvisable; this is because they come after the purpose has changed and so are not so useful for theintention for which they were first requested. This may lead to massive losses.******It had been an excruciatingly hard long year for us, a year that was marked by a lot of ups and downs infinancing our customers. At one time the portfolio at risk had gone so high that it made me sick, just sickenough to cause me to leave and go back to my native Kenya. When portfolio at risk goes up, it meansthat the percentage of loans that have a high likelihood of being defaulted has increased.The bank had funded several farmers on a pilot basis. No one had an idea on if they were going to pay ornot. Although we had tried our best to carry out a due diligence, sometimes things never worked outperfectly. If things went wrong, I reasoned, then it would have been very bad, for the only stableguarantee we had in this case was group guarantee and nothing much else.******
  5. 5. 5I came back to my mind and across the road I could see a file of ducklings led by mother duck crossingthe road. This caused the bike to swerve almost causing us to fall in the sand. “Had I been the rider, wecould have fallen” I said to myself.Just then we stopped next to a small village shop that seemed to be stocking only what the villagersneeded and none of what they did not need. A tall dark lady came out and greeted us in a rather familiarlanguage by now, this I had learnt was called Kuranko. She then continued talking to Mr. Lansana whoseemed to be listening very keenly and observing as if he was studying the different muscles of her face.When the lady finished, she rushed to the back of the house and came with a large group of peoplefollowing her. It seemed that there was another meeting going on behind the house.They formed a semi-circle, which was very usual when it came to microfinance but not banking. I sat inthe middle as if I was the focal point of the meeting. The usual meeting procedures followed.Some of the female beneficiaries“The loans you gave us really helped us” started the tall lanky secretary who was dressed in a khaki shirta navy blue denim jeans and long gum boots typical of rice farmers. “All farmers that we guaranteedhave finally paid by now, so we need you to think of next year’s loans.” To me this was some sort ofrelief to hear. It meant that the system of lending that we had applied was working. It was a systemwhere the farmers were required to carry out a peer appraisal and then co-guarantee each other. I hadseen it work very well in the Northern Bahr el Ghazal area in Sudan and in Kenya’s North Rift province,but that was with small scale traders. The simplicity of this system was that the group was expected toself select its members and each person were to take responsibility in case there was default. To guardagainst risks that were as a result of natural death of a member, we had organized an insurance fundwhich was supposed to guard us. Guarding against risk is arguably one of the most important jobs forany financier and one of the easiest to get wrong.I rejoiced to hear this, because when some clients pay one can always afford some sleep even though Iwas not a loan officer or even part of the loans department. Agricultural lending in Africa is so risky anddetermined by so many factors beyond our own control that sometimes those involved can only afford
  6. 6. 6to pray and hope that weather will remain friendly, pests will keep away, and the farmers themselveswill not create excuses for not paying; I had heard stories where some bankers had resorted to prayers.Farmer group at Nyafrandor during the meeting.At this point, the chairman of the group rose up and started to speak through an interpreter who was ayoung lady who looked educated as compared to the other group members.“This year, every member received a total of one million Leones. About ten members used this on theirrice fields while the rest spent it on growing of vegetables. Since we are thirty members, we dividedourselves into subgroups of five resulting into six groups.” I just glanced at him showing no emotion atwhatever it was he was saying. I had learnt from previous farmers that you only believed what you sawwith your eyes not listening to what chairmen said.This was followed by speech after speech. My mind got tired and I could not follow the procedures, itjust went into autopilot. The speeches were all the same thing thanking and many other things. All werein the native Kuranko and translated by the same person who was now very tired.After the meeting two young men were called in from the back of the house and directed to chauffer usto the farm which was about two miles away from the village on their Honda XL bikes. This made us feellike VIPs albeit in a village way. All the three bikes looked old, maybe from the heavy work of ferryingproduce to the hilly Kabala markets and other goods to the village.As we are on the path that appears to mark the end of the woods and into an extensive tract of levelopen land, I can see beautiful green scenery that welcomes me into the land that is filled with greenhealthy cabbages. The mere spectacle of such an approaching beauty overwhelms me.“The loans you gave us, we used to grow these cabbages you see here. With the same fund, we wereable to purchase high quality seed from Holland and some higher caliber inputs which led to amazingresults. Luckily, officials from Fairtrade happened to come across and were so impressed to see what wehad done courtesy of the loans you gave us. Fairtrade is an organization that helps producers who aredoing high quality work sell their goods in the export market. As we are talking, our produce is certifiedto enter the export market.” At this, I am amazed almost to the point of shedding a tear. At this point itfinally hits me how agricultural lending if done in a farsighted way can pull a rural society from a culture
  7. 7. 7of dependency to that of self dependency. Looking forward you could clearly judge that this is harbingerof better things to come for this particular society.By the time we leave the farm, it is almost too dark. We pass by the village where we enjoy a tasty mealof cassava leaves cooked in an appetizing monkey soup, besides there is a big communal plate of ricewhere everybody scoops while discussing the day’s events. By this time, I am so hungry that I find myselfscrambling for some space besides the bigger metallic plate. I forget that I am supposed to behave like aconsultant. After this we are given two live chickens to share with the other IFAD staff as a sign ofappreciation, but I know these two will be headed for my kitchen only.As I disappear into the pitch darkness away from the village towards Kabala on the back of the bike, Iinspired that this specific rural finance project and others across the globe have for sure empoweredcommunities. Here I had just witnessed people, who not so long ago were depending on alms and otherindecent ways of living, are looking forward to joining the lucrative exporters’ fraternity, thanks to therural finance project.One of the cabbage farms funded by the bank.By Dickens Aluha Mujumba RTA Koinadugu District Sierra Leone.