Buusaa Gonofaa MFI Agricultural Credit Service Overview By: Wolde Zewdie Urge Buusaa Gonofaa MFI Ziway Branch E-mail: waldbgziway@gmail.com March 27/2015 Batu Town
Introduction Buusaa Gonofaa MFI-is established by local NGO called HUNDE GRI. It has licensed by NBE as MFI in 1999 G.C and started operation in 2000. It has started Financial Service operation in Ziway around 2008 It had been working with:- - ide-ethiopia on d/t Project phases as, RPI, RAPID and SMART up to Dec. 2013 & - CRS & MCS on GRAD Project( for the last one year period) Its target clients- rural poor, specially women, smallholder farmers, landless youth etc Busaa Gonofaa MFI has two major Financial Services: Credit and Saving services. 2
BG MFI Agri. Credit Services 1. Credit Services Loan Products- SRF, Input(Irrigation), Rain-fed loan & MIT Target Market - Smallholder farmers who depends on Agricultural activities Lending Methodology- Individual and partly Group lending approach Two kinds of Credit services - Credit in Cash-SRF& Input(Irrigation) - Credit in Kind- rain fed loan(fertilizer &selected seed) Loan Term- 3-12months(includes all loan products) Loan sizes ETB 1,500-15,000(includes all loan products) Repayment Modalities- Monthly installment from interest portion( Except RF) Interest Rate- 18-24% per annum 3
Buusaa Gonofaa MFI Loan Criteria She/ he has to have legal personality(age > 18 years old) Permanent resident of the specific areas of our operation Have good reputation and trust in the community She/he should have to good past credit history( Gov`t tax, fertilizer and selected seed, coop. loan and credit from any financial institution) She/ he should avail personal and collateral guarantee She/he has to be capable enough to manage the credit amount The loan should be invested for the income generating activities She/ she should have to willing to attend regular meeting. She/he should have to repay the loan regularly per installment. She/he should haven`t o/standing loan bal. from other bodies. 4
Types of BG MFI Agri. Credit Services 1. Rain fed Input Credit BG MFI purchased input & disbursed to the clients in the form of credit Advantage of RF Credit for Farmers Easily access an input during slim season Save the existing Capital Asset that they sold for Input purchase in low cost It increases the productivity of their crops since they have used full package It Plays a decisive role in ensuring food security of poor farmers It increases the confidence of the farmers to produce more than before 5
Buusaa Gonofaa Special Cont 2. Irrigation-Input Loan This credit is offered to the farmers that need to engage on irrigating High Value Vegetables like Onion, Cabbage(Leaf and folded), tomato Advantage of Loan for Farmers Used the farmers to cultivate their land rather than renting to others Used the farmers to get higher income from small plot of lands Creating job opportunities for jobless and landless youths Creating additional income opportunities for Farmers They paid the Pr. at the end of harvesting prd (fully used the loan) It increases the cycle of production three times a year They access the credit service at their home(assessment & doct`n) 6
Types of Buusaa Gonofaa Credit cont... 3. Credit for Micro Irrigation Technology(MIT) MIT is a water lifting technology which used to irrigate small plot land from 20m 2 to 2500m 2 area. Those Technologies are:- Rope and washer pump, Treadle pump, section only Treadle pump, River pump and solar pump. Advantage of MIT for Farmers It is affordable for poor smallholder farmers Used for cultivate HVVC on small plot of their backyard and Used for domestic uses like drinking self and livestock, and Home consumption Human labor intensive i.e. operating by family labor(no Fuel) 7
Buusaa Gonofaa MFI Saving services 2. Saving Services. 2.1 What is Saving? Money that put away in the present for future use It is a way to build assets An investment in jewelry, animal, land and changing to money when needed A fundament instruments for money mgt 2.2 What are the advantages of Savings Unexpected future events like sickness, Funeral, emergencies and theft Expected future events as education, old age & to use during LI season To build an Asset and business opportunities such as build house cattle etc To reduce Interest cost on credit and to get financial benefit(interest) Buusaa Gonofaa MFI has Dedicated to Change the Livelihood of the Poor!!! 8
BG MFI Saving Product Based on the interest and profile of the clients BG MFI has designed THREE types of saving Products 1. Saving Account(Hirko) This saving product can be saved and w/drawn at anytime the clients dd. The initial saving amt to open the acct is 10birr & can add more To generate interest income the saving bal. should be more than 50br and stays 30days. It has 6% interest per annum. Any Depositor( Individual and formal groups) can use this saving prt. It has its own Passbook as any financial Institutions like Banks Preferable for those who get regular income. etc Buusaa Gonofaa MFI has Dedicated to Change the Livelihood of the Poor!!! 9
BG MFI Saving Prdt Cont` 2. Planned Time Deposit(Iqubii) This is the saving products that can be saved with the same interval of time and the same amt up to the due date of saving. Its frequency of saving is in weekly, bi-weekly and monthly basis. It should be saved at least for six months period. Withdrawal is possible on the due date of saving period. Initial Deposit balance should not be less than 50 birr. It generates interest rate of 6%,7% and 8% per annum based on the length of the deposit period. If not w/drawn on time it will be TR to saving acct and generate int. accrdly. Good saving option for those who have regular income depositors & employee 10
BG MFI Saving Cont` 3. Time Deposit (Qusannoo Abdi) This is a fixed term saving that w/drawn on the maturity date of savings. It is impossible to add an other saving amount on this deposit. I t has saved for at least 6 months and above. The least initial deposit balance is 100 birr and above. Much better interest income than other saving products. Interest rate 8%,9% and 10% per annum for those who deposit for 6-12, 12-24 and 24and above months respectively. Good saving product for those who directly engaged on farming and fattening activities. 11
Benefit of Saving vs Credit No Saving Services Credit Services 1 2 3 Own Money that can get when need arise Service is based on the full interest of the depositor. Totally benefits the one who saved - No harms Someone's money that not get based on your need Service is based on the policy and procedure of the financial instit. May or may not benefited the one who access it 4 Contributes to build an asset -Either to increase or decrease the existing asset of the borrowers 5 It has financial Benefits as it earns interest income It has financial cost as it incur interest cost on borrowed money 6 It builds personal confidence of the Depositors. Filled with risk of temptation (if not invested on IGA) 7 Continual financial services Service is quit in case of default Buusaa Gonofaa MFI has Dedicated to Change the Livelihood of the Poor!!! 12
Financial Service Challenges Getting the target and feasible clients for the services Loan management skill of the borrowers like using the borrowed money for consumption purpose Unwillingness of the clients to attend regular meeting schedule. Default not timely repayment as per agreement Lack of trust on saving Liquidity problem to address clients timely etc MFI mkt is contaminated with different NGO`s and Donors funds Farmers have not side business from w/c it pays the loan(rf) Farmers have not access market to sell the production in reasonable price. 13
Challenges. Double Loan from different MFI`s operating in the area(b/s of lack of info. Sharing among the MFI`s) Low culture and awareness of Farmers to use Modern Technology(Full Package scheme) as per the strategy of the Government. Lack of Diversified Agricultural Activities in the Area( b/s of the Nature of the Ecology) to expand the operation. Natural Disaster such as Drought, Flood and s/t unseasonal rainfall w/c enfoces the farmers to default the loan Lack of sufficient Agricultural Input ( Fertilizers and Selected seed) to disburse the loan as per contract agreement with farmers. Lack of Seed variety as per the demand of the farmers Buusaa Gonofaa MFI has Dedicated to Change the Livelihood of the Poor!!! 14
Lessons Learnt We assured the effectiveness and sustainability of financial services for Agricultural Activities in Rift valley area. We highly observed the positive impact of Financial services on the livelihood of the poor household The possibility of changing the mind setting of the poor farmer from expecting grant to become productive using financial services The possibility of Graduating the poor farmers under PSNP Program We are convinced the slogan of UNITY IS STRENGTH doing with partners having the same social mission(ide) We learnt success through challenge.. 15
The Way Forward BG need to take an initiative to reduce double loan among d/t financial institution that operate in the area. Continues to work with d/t Government bodies, NGOs and other stakeholders that strives to the livelihood of the poor farmers To address clients with Reasonable Loan size based on their capacities, past credit history and nature of the activities(specially engaged on Irrigation) activities in near future Exhaustively exerting our time and Man power on educating financial education for illiterate people like Saving and Debt Management. We need to expand Rain fed input Agricultural loan in new areas. 16
Recommendation and Conclusion The Government body should give particular attention on financial awareness of the community Government officials should keep up their support when clients do not need to repay the loan as per the loan agreement. The concerned input suppliers should avail the input as per the need of the farmers as:- - In due times and places - Based on the need of the farmers in terms of quantity, quality and seed varieties 17
THE END HORAA BULAA!!!!!! 18