"The banks will not lend me money because I do not have collateral": An all too familiar phrase from small scale farmers around the country and in many other African Nations.

Although agriculture provides income and daily sustenance to more than 72% of the Rwandan population, access to finance for agriculture remains a great challenge. Despite efforts by the government and other stakeholders to increase the risk appetite for agriculture financing, the low response from local banks leaves much to be desired.

To increase access to finance for Rwandan farmers, The Development Bank of Rwanda (BRD) has supported the East Africa Exchange (EAX) in a new frontier that will see many small scale farmers benefit from access to loans using their farm produce as collateral. With this support, lack of collateral may soon be a problem of the past for Rwandan small scale farmers in accessing finance from local banks. 

With EAX, a poor small scale farmer in rural Nyamagabe for instance - with nothing to her or his name but the maize or millet from the farm - can now walk into a commercial bank and qualify for a loan.

A commodity exchange platform, EAX not only links sellers and buyers, but also goes beyond to ensure that it is providing additional value to both producers and buyers. To the producers, EAX has made it possible for any farmer, cooperative or trader to easily access commercial loans to expand their business ventures through the Electronic Warehouse Receipts System (EWRS). To the buyers, EAX guarantees consistent quality and quantity.

EAX has a diverse range of buyers including the UN World Food Programme (WFP), breweries such as Bralirwa, and local animal feed producers. The company operates 11 State-of-the-art warehouses located close to production areas in 8 districts in the country. When farmers deliver their produce to the warehouses, the produce is professionally handled; from grading to cleaning and drying to re-bagging, the produce undergoes a rigorous process to ensure its quality to buyers and a guarantee to fetch high prices from the market.

The receipt generated through the EWRS is essentially used by commercial local banks as collateral for loans issued to the farmers. "When farmers bring their produce to us looking for market, we offer them 2 options: to sell their entire commodity to our clients or sell part of it and store the rest in our warehouse whereby they can sell it in future - when the prices are higher and, at the same time use it as collateral to secure a loan from a commercial bank," explained Joshua Rugema, EAX's Head of East Africa.

Local banks give farmers using the EWRS up to 70 per cent of the value of grains deposited in the EAX warehouse. To date, individual small scale farmers and farmer cooperatives have accessed loans to the tune of over Rwf. 1 billion; with all participating banks reporting zero default rates. "Our state-of-the-art warehouses have significantly reduced post-harvest loses. In addition, EAX guarantees market for farmers' grain on the one hand and quality and quantity for our clients on the other hand. This due diligence gives banks the confidence to lend to farmers,â€Â said Rugema.

BRD's support to EAX has provided small scale farmers in the country with choices that have improved their lives and livelihoods. There are now 264 farmer cooperatives which are active members of EAX; most with as many as 100 members. According to Rugema, finance is the grease that keeps the wheels turning in commodity exchange and the financial support from BRD has made it possible for EAX to continually and consistently offer market to farmers at prevailing market prices and guarantee quality for buyers.