Association of Microfinance Institutions in Rwanda (AMIR) and Cordaid, an international non-governmental organisation for relief and development aid, on Thursday August 17, organised an access to finance learning workshop to discuss achievements, challenges of accessing finance, and sustainable financial solutions for empowering smallholder farmers.

The workshop brought together over 100 participants with expertise in access to finance in agriculture from public and private institutions, developmental partners, microfinance institutions, regulators, policymakers, tech providers, and agriculture cooperatives.

Patrick Birasa, the Cordaid Country Manager, said the organisation partners with microfinance institutions to improve smallholder farmers’ access to finance through technical assistance to develop tailored financial products.

It also supports financial institutions in capacity-building, access and use of digital solutions for agri-loan assessment, refinancing and risk management.

Some of the financial products introduced by Cordaid include group agri-finance loans. The group solidarity loans are given without any collateral based on group guarantees.

Individual agri-finance loans target individual farmers in need of investments, production and commercialisation.

The warehouse receipt lending products go to individual farmers based on agriculture products stored in a warehouse which constitute a guarantee of repayment.

The value chain finance product is based on linkages in the value chain as security for the loans.

"We want farmers to have access to finance to afford inputs required in production. We have to empower both farmers and financial institutions that provide loans with digital services,” he said.

Birasa said there are still challenges related to access to agri-loans, insurance as well as saving solutions.

"For instance, women farmers need loan products that suit their needs and digital solutions to reduce the distance they spend going to seek financial services and training,” he said.

STARLIT project

Birasa cited the STARLIT project funded by IFAD to enhance smallholder farmers’ access to agricultural digital information, agricultural mechanisation for youth, access to agri-finance and knowledge sharing.

The project introduced the Agriculture Credit Assessment Tool (A-CAT) for Saving and Credit Cooperatives (SACCOs) to foster local economic development.

The tool provides reference estimation for production of a specific crop, including production costs, cash flow and productivity estimates.

The technology was adopted by 12 SACCOs to manage agriculture finance and reduce default risk. A-CAT facilitates faster loan disbursements and farmers have reported receiving appropriate finance for their production activities, leading to reduced diversion of funds for other purposes, as the tool helped to ensure that loans were utilised for intended purposes.

Farmers who benefitted from Cordaid interventions have reported increased loans and earnings.

"Cordaid linked us to a micro finance institution which provides loans to our members, in small saving groups, without any collateral in order to increase production, pay school fees and repay after harvest,” said Jean Baptiste Ngendahimana, president of CAPRORE Intambwe cooperative which grows maize and soybean in Gatsibo District.

Epiphanie Niyonsenga, a farmer in Nyaruguru District, said in addition to using digital tools, the cooperative was linked to a financial institution and acquired a Rwf4 million loan which was paid back last year after maize harvest.

"We save using the CHOMOKA app on our mobile phones and also acquire loans using the same phone,” she said.

Chomoka is a smartphone-supported tool offering savings groups, and women in particular, a low risk entry point to the digital economy.

The application makes it easy for groups to track their finances, increase recordkeeping transparency, and build a credit history and transition from informal to formal financial inclusion.

It guides saving groups to enter each transaction into the application, creating a digital record of each member’s behaviour and financial balances.

Under the STARLIT project, 1,176 farmers accessed agri-loans while 3, 400 farmers accessed digital extension services.

Livestock financial products and farmer saving groups

With RDDP and PRISM PROJECTS, Cordaid helped to develop specific livestock financial products that enable MFIs and SACCOs to serve small livestock farmers and small enterprises operating along the value chain.

Six SACCOs have issued 31 loans, worth Rwf24.3 million from December 2022 to June 2023.

Under the collaboration between Cordaid and World Food Program, 1,818 farmer saving groups were created with 32,670, of whom 16,801 are women. They have saved Rwf326, 388,118 and 1,241 savings groups linked with financial institutions.

According to Jackson Kwikiriza, the Executive Director at the Association of Microfinance Institutions in Rwanda (AMIR), farmers need easy access to information about financial institutions’ products to make use of them.

"Financial institutions can provide loans to farmers where saving groups and cooperatives serve as guarantees. We identified what we have already achieved and what we can improve by designing new strategies,” he said.

Access to finance among adults is 93 per cent, he said, however, usage of financial services is still very low and needs to be improved.

So far 42 per cent of Rwanda's population are clients or members of microfinance institutions and SACCOs. However, AMIR notes the problems are still affecting smallholder farmers in access to finance.

These include high interest rate for the famers, limited access to crop insurance, costly and time consuming of loan application processes, lack of capital to buy inputs, climate change issues, market linkages, pests and diseases attacking crops, limited infrastructures like modern agricultural machinery and cooling systems as well as collateral, especially for youth and women.

Distance to the branches can sometimes affect female smallholder farmers, financial literacy level, low participation of female and youth with male dominance, cultural norms, and others, are some challenges affecting women.

Olivier Kamana, the Permanent Secretary at the Ministry of Agriculture and Animal Resources, commended Association of Microfinance Institutions in Rwanda (AMIR) and Cordaid for enhancing access to finance among smallholder farmers although there are still challenges.

"The Cordaid interventions have played a big role including youth, women and refugees in access to agri-finance initiatives to increase earning and savings to increase food security,” he said, adding that the Cordaid projects have improved climate resilience of farmers.