The document discusses Community Development Foundation's wholesale microfinance strategy in Nigeria to improve access to finance for agriculture. It provides loans to apex community organizations, who then lend to individual members. This reduces transaction costs compared to lending directly. Challenges include funds not reaching members and political influence. Capacity building for apex organizations is important. CDF was established in 1993 to provide financial services and capacity building to grassroots organizations through a wholesale model.

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The Wholesale Microfinance Strategy
Community Development Foundation Experience
Paper presented by
Mr Akin Akintola
Executive Director
Community Development Foundation
In
Fin4: Revolutionising Finance for Agri‐value Chains
Conference
Organised by
Technical Centre for Agricultural and Rural Cooperation (CTA)
On
14 ‐19 July 2014
At
Kenya School of Monetary Studies
Nairobi, Kenya

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Introduction
Agricultural Financing has always been a challenge despite the much attention it has
received through various government interventions, policy support and in many cases,
establishment of institutions to address the ever recurring issue of access to finance by
farmers.
In Nigeria, there is a long history of efforts to meet the farmers credit needs and to support
agricultural value chains. Due to the recognition of its importance, succeeding governments
have initiated various programmes and interventions to enhance service delivery to the
rural areas especially farming and agricultural chains. However most of the interventions
have not achieved the desired objectives and in some cases, have failed woefully.
Some of the interventions include but not limited to the followings;
1. Sectorial allocation of credit to the agricultural sector
2. Nigeria Agricultural Credit Bank
3. Rural Banking Programme
4. Agricultural Credit Guarantee Scheme
5. Nigeria Agricultural insurance company
6. Peoples Bank of Nigeria
7. Self‐ help group linkage Programme
8. Family Economic Advancement Programme
9. Community Banks
10. Agricultural Credit Support Scheme
11. Nigeria Agricultural Cooperative and Rural Development Bank
While some of these programmes have become defunct some of the programmes are
ongoing and being fine‐tunes or enhance to make them more effective. There are also
numerous programmes by the component states of the federation to improve access to
finance for agriculture.
Background
Most of the policies and programmes of intervention for financial inclusion of the rural
populace who are largely engaged in agriculture value chain did not achieve their full
objectives. Many of them were politicised as succeeding administrations either abandoned
them or just simply discontinued. Some of the institutions were inadequately funded to
meet operational demands. Banks also avoided the various policies and instead preferred to
pay fines for non‐compliance. The implication, of course, was that the farmers remained
underserved.

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These inefficiencies, discrimination by banks and inadequate coverage of financial services
led to emergence of Non‐Government Organisations seeking creative ways reach the
underserved rural communities and also to reduce poverty. Community development
Foundation introduced the wholesale Microcredit as its contribution.
CDF Wholesale Lending Strategy
The wholesale lending strategy is focused on providing credit to the poor and rural dwellers
through their Apex Associations. The apex institutions include Community Development
association (CDA=s), Credit Unions, Community Based Organisations (CBO=s), Community
Based Enterprises (CBE=s) and co‐operative societies. The ultimate target remains the
individual members that belong to these apex institutions either directly or through their
primary societies. This is sometimes combined with Institutional Capacity Building as may be
necessary to guarantee success.
The wholesale strategy Microfinance services is premised on the following facts.
 The poor in an attempt to effectively manage their small resources do come
together to form associations for simple financial intermediation and to gain access
to credit. These small associations exist in form of cooperative societies, trade
association, etc.
 In many cases these small associations come together to form large bodies in form of
unions, community development Associations, Community based organisations,
market associations etc. These large bodies leverage the strength of the constituents
for greater access to funds and loans.
 These institutions exist based on common interest and have gained experience in
managing their own funds and in many cases have an established procedure for
membership, loan assessment, loan monitoring and collection. In some cases they
have managed commercially borrowed funds.
 Members own the institutions and they meet regularly to take all decisions together
or through their elected representatives. The members also volunteer themselves
for different roles within the institution. They seldom have paid staff.
 Consequently, transaction costs of managing loans among them are low compared
to the cost to be incurred if an external organisation were to lend to the individuals
directly.
 If the formal banks and other financial institutions fail to serve the poor or have
difficulty working in the rural areas their own institutions will always provide services
to them. Hence the focus of wholesale strategy is to make the institutions strong and
viable to continue to provide services to the members.
 The apex institutions as umbrella institutions are registered thus providing formal
coverage for the primary constituents.

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Benefits of the wholesale strategy
1. With a single lending a greater number of clients could be served instead of small
loans packaged for groups or individuals.
2. Using the wholesale approach is relying on tested institutional systems which have
been there for years and to which the borrowers are already used to.
3. The apex institutions have already developed different loan products structured
based on the type of environment and business, and the loans could be used for any
of these products.
4. Members and officers of the institutions know the borrowing capacity of one
another and will be able to effectively assess each member’s need for funds. They
also mobilise savings from members and such savings will be part of the internal
collateral for any members and part of the basis of assessment of capacity and loan
limits.
5. Apart from microfinance this approach promotes leadership at rural levels which is
required for effective and sustained access to finance in rural settings. It can also be
a strong platform for advocacy by the farmers. Banks and institutions with high cost
structure could work through the apex institutions to reach the rural populace.
Challenges of the Wholesale lending Strategy
The strategy is not without its challenges, some of which are;
1. Sometimes the funds do not trickle down particularly when the leadership is
selfish and greedy. The excuse always is that because the money is external only

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a few capable members could be considered to have access to it. When this
happen the group pressure may fail and losses could be high.
2. While the institutions records could be assessed direct access to members can be
very limited thus not giving opportunity to know the overall performance of the
Apex institutions.
3. Sometimes the leadership may not be abreast of new developments in the sector
due to age or level of education, and this may affect the performance of the loan
4. The Apex institutions are being gradually dragged into politics. Most of the
leaders are the opinion leaders in the community and politicians consider them
crucial to their electoral fortunes. This has been mainstreamed into their
operations and member selection thus making them less effective. They have
become channels of funds in many state microfinance programs that are
subsidized and politicized and with consequent distortion of practices. A careful
selection of apex association is very important to avoid the already distorted
ones.
5. Sometimes, period of leadership change could be turbulent leading to
disintegration of the apex. Most leaders stay too long and become less effective.
6. Some unions have good and performing primaries associations mixed with the
not too good ones. The poor performance of the few may affect the overall
performance of the loans. The lending institution can select the participating
primary associations as part of the deal.
7. Higher grade of employees are required to manage wholesale lending
particularly with multiple levels of assessment and interpreting the financial
statements provided by the association and also authenticating the documents.
It is sometimes important to support the apex institutions with capacity building where
necessary. This will involve the upgrade of systems, training in the areas of leadership,
succession planning, and financial management. As opinion leaders, they are a good
platform for advocacy and could be trained to play effective role in getting the state to
provide necessary structures and infrastructures for sustained financial services to the rural
areas. Sometimes Capacity building will be needed in the areas of organisational
development.
The Community Development Foundation
The neglect of community development finance in Nigeria as revealed through the study
by a representative group of community development associations, other professionals
and the Ford Foundation, led to the establishment of the Community Development
Foundation (CDF) as a , non‐government development financial intermediary organization
in June 1993.

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CDF is a development Institution engaged in poverty reduction and economic justice
through provision of institutional capacity building and financial services to Grassroots
Development Organizations (GDOs) Community Based Enterprises, Rural Financial
Institutions (RFIs) and Community Development Associations (CDAs) in Nigeria.
CDF commenced operations in June 1993, and have played prominent roles in micro‐finance
development initiatives while building capacities of several grassroots institutions in all the
geographical zones of Nigeria. It builds on existing local development finance structures and
systems in a participatory manner, with emphasis on the principles of self‐help, equity,
dialogue and recognition of indigenous and other proven systems. The CDF’s involvement in
micro‐finance development schemes employs the wholesale delivery approach. Essentially,
it is this decentralized financial intermediation methodology that allows CDF reach the
critical mass of the poor at their doorsteps.
Objectives of the Foundation
 To provide institutional capacity building services to enhance the credit and
enterprise activities of our clients through a professionalization process
 To provide client organizations with loans and loan guarantees for their credit and
enterprise programs and operations.
 To promote linkages between our clients and formal financial institutions
 Conduct research on issues relating to micro‐enterprise development and finance.
For Institutions to gain access to CDF loans, they
 Must be registered with evidence of Certificate.
 They must have existed for not less than 6 months
 Must be in the business of savings and loans and with evidence of good performance
 Democratic leadership with good governance records
 Effective participation of members in decision making
 No gender discrimination or restrictions
 Good financial management and accountability to members.
 Members must be involved in enterprise activities.
 Institution must be owned by the members
Conclusion
Despite the challenges associated with the whole sale microfinance strategy, it remains one
of the most effective ways of reaching the large underserved rural population in Nigeria. It

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promotes best practices in rural finance and strengthens local and grass root financial
institutions. Opportunities abound in Nigeria for wholesale rural finance window and may
be the answer to that issue of high costs of doing business in rural areas by banks and
microfinance institutions.
Thank you for listening.

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References
1. Tunde Lemo, Keynote address at the Rural Finance Workshop Organised by
Community Development Foundation, 2008
2. O. A. Afolabi, Creating Environment for Rural Finance in Nigeria, Rural Finance
Workshop, Organised by Community Development Foundation, 2008
3. The constraints and Challenges Associated with Developing Sustainable Microfinance
Systems in Disadvantaged Rural Areas in Africa, UNCDF, 1999.
4. Henry Oketch and Stephen Mirero, Summary proceedings of Workshop on The
challenges of planning and Managing Growth for Africa’s Microfinance Operators,
International Network of Alternative Financial Institutions(Africa Region),Ethiopia,
2004
5. David Hulme and Paul Mosley, Finance against poverty, Routledge, London & New
York, 1996
6. Report on Rural Microfinance in Nigeria, Community Development Foundation,
Lagos, 2008.
7. EFInA key Findings on Banking and Informal savings, Lagos, 2010