Why farmers are loyal to micro-finance institutions

Rwandans have hailed the role of micro-finance institutions just as Kigali is hosting a global financial inclusion summit starting today. The summit, code-named “Financial Inclusion for Inclusive Growth and Sustainable Development”, brings together financial sector regulators, policy makers, and eminent researchers across the globe to discuss the achievements and challenges of global financial inclusion, according to the central bank. The event, organised by National Bank of Rwanda in partnership with Alliance for Financial Inclusion (AFI), African Development Bank (ADB) and the World Bank is part of the central bank’s golden anniversary activities. For many years, Viateur Mutoni had been thriving on a meagre income earned from tilling a small plot of land in his home village in the rural Shaba Cell, Kitabi Sector, Nyamagabe District. The output from farming was not even enough to feed his family let alone selling some to uplift his family’s living conditions. But, about three years ago, the father of two took a drastic decision to change the course of his life and that of his family. Aware indeed that he lacked enough funds to stand on his own, Mutoni joined a local savings and credit cooperative. He would later secure Rwf300, 000 in loan which he used to start poultry on a small-scale. After two years, using Rwf500,000 he had got as proceeds from the poultry business and a Rfw1m loan facility, he expanded his chicken project. He also invested part of the loan into growing tomatoes with hopes to boost his income. Today, both projects are fetching him good money which he says has helped transform his life. “I am now better off and the living conditions of my family have improved,” he says proudly. Currently, Mutoni is a happy middle-class farmer looking forward to expanding his chicken project from the current 120 layers to at least 400 by the end of the year. He also plans to expand his tomato garden and start growing new fruit varieties and vegetables to further expand his income sources. “Working with micro-finance institutions gives us the ability to implement projects we wouldn’t be able to carry out on our own,” he says. Mutoni is not the only one who has realised how working with financial institutions can help change lives. Francois Mugemankiko, 42, a resident of Kabusekura village in the remote Uwinkingi Sector, Nyamagabe District, also attests that working with micro-finance institutions has helped transform his life. Mugemankiko alternates maize, wheat and potatoes on a one-hectare plot of land that he rents. He says he wouldn’t have been able to implement his project without the support of micro-finance. In the past three years, Mugemankiko has secured a loan totalling over Rwf4 million in different instalments from a local savings and credit cooperative, and hopes to secure more as his projects grow. He uses the money to invest in his agriculture project and says he has always been able to pay back the money without difficulty. “Whatever I have achieved was a result of working with savings and credit coops,” he says. “Whenever I need money to invest, I submit a project proposal and have always been able to secure a loan on time.” Loan availability A number of farmers say they prefer working with micro-finance institutions rather than commercial banks as it is easier for them to secure loans from these institutions. Mugemankiko says it often takes just a ‘fortnight’ to know the feedback on a loan application submitted to a saving cooperative while it might take months for one to get a response from a commercial bank. Loan application procedures are much easier in MFIs than in commercial banks, he says. Jean Nshimiyimana, a maize farmer working with a sector-based savings and credit cooperative in his home sector of Cyahinda, Nyaruguru District, says micro-finance institutions present opportunities for life transformation, particularly to rural farmers. “Agriculture is profitable when it is done in a proper manner,” the father of one says. “And having access to funding brings with it a positive change in the way agriculture is done and impacts lives of farmers.” Nshimiyimana advises fellow farmers not to shy away from loans. “One only needs to have a good understanding of their project, follow up on investment closely and make sure everything is done in the right way,” he says. Juvenal Ntakaziraho, a potato farmer in the northern district of Musanze who has been working with financial institutions for over five years now, says working with financial institutions has helped him access funding with ease. Farmers, however, cite unreliable weather patterns among the key challenges facing them. But they remain confident, saying there are many ways of mitigating the effects of such climatic changes on production. Availability of agriculture insurance schemes has also boosted farmers’ ability to limit potential losses that might arise from the unpredictable weather patterns. The government says it wants to double formal financial inclusion, to 80 per cent, within the next three years. Figures from the central bank indicate that Rwanda has made remarkable strides, doubling formal inclusion from 21 per cent to 42 per cent over the years. The country reduced its total exclusion from 52 per cent to 28 per cent between 2008 and 2012. Figures indicate that the country boasts nearly 500 micro-finance institutions and savings and credit cooperatives with a combined capital base of nearly Rwf80 billion.