Expanding Rural Finance with Public-private Partnerships in East Africa, Retraining Loan Officers in West Africa

By AGRA Content Hub

At the session on “Enabling Rural Finance: Multisectoral Collaboration” during last week’s SAM conference, Hedwig Siewertsen of the Africa-based Alliance for a Green Revolution in Africa (AGRA) discussed her work helping the government of Kenya experiment with mechanisms to extend the reach of its limited funding for agriculture. In 2016, the government had USD 7 million to invest in agriculture and was considering acting as a lender to disburse that money to the agricultural sector. Recognizing that the government may be better at market facilitation than managing money, AGRA worked with officials to bring in Barclays Bank of Kenya and the World Bank Group’s International Finance Corporation (IFC) as partners. As a result, the government was able to leverage its USD 7 million to guarantee USD 23 million in lending from Barclays. This enabled 150,000 farmers as well as 300 small and medium-sized enterprises (SMEs) – including producer organizations – to access funding and non-financial assistance, such as help with business planning.

At the same session, Ousmane Thiongane of the Senegalese microfinance institution network U-IMCEC, described his organization’s struggles entering the agriculture sector. Despite agriculture being a risky proposition, the organization’s mission demanded that it serve rural areas. At first, he explained, “our rural agents weren’t well trained” in agriculture and thus the entry into rural areas “was a complete failure.” With agents lacking basic information, such as the differing cycles of potato and onion crops, portfolio quality suffered. In response, U-IMCEC began to train loan officers as “local portfolio managers” rather than credit agents. Armed with much improved agricultural knowledge, U-IMCEC was able to give farmers the financial support they need in a way that allowed for institutional stability. This included maintaining a “high-touch” model of staff-client interaction even as the organization brought in more technology. Mr Thiongane says, “We have no choice…microfinance cannot be separated from digitalization today.” While some clients remain uninterested in e-money, financial technology (fintech) is allowing U-IMCEC to reduce its operational costs.

Representing Belgium’s Alterfin, as well as the 12-member Council on Smallholder Agricultural Finance (CSAF), Jean-Marc Debricon discussed the differences between investing in agriculture and mainstream microfinance. For example, loans to producer organizations generally have shorter terms than loans to microfinance institutions. For the members of CSAF, microfinance investments tend to be stronger, allowing them to meet their missions of investing in rural areas where they generally accept more risk or lower returns. Mr Debricon also described CSAF’s work on Aceli Africa, which will launch in 2020 with a pilot program in East Africa. The effort is a public-private partnership mobilizing funds for agricultural SMEs through instruments such as a guarantee fund to protect investors against potential loss.

Safiatou Malet-Coulibaly of Luxembourg-based SOS Faim discussed her NGO’s work with “agri-plus” in Burkina Faso, Mali and Niger. She argued that producers’ organizations are critical partners for managing risk – both market risks and those related to climate change. Ms Malet-Coulibaly’s organization has supported 48 such organizations with loans, guarantees to help them access bank financing, and technical assistance relating to both finance and agriculture.

This article is part of a sponsored series on SAM (the French acronym for African Microfinance Week), a major conference dedicated to financial inclusion in Africa. The most recent SAM took place in Ouagadougou, Burkina Faso, from October 21-25, 2019.