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Dear Colin Poulton, FARM-Africa is a British based NGO that has been working directly with poor rural African farmers and herders since 1985. FARM works in Ethiopia, Kenya, Uganda, Tanzania and South Africa. Earlier this year, FARM-Africa, in collaboration with the Centre for Development and Poverty Reduction, Imperial College and the British NGO Harvest Help, produced a policy paper that makes a strong argument for increased levels of investment in the smallholder African agriculture sector as an effective way in which to contribute toward poverty reduction. Your question number three asks about replicable models for financing smallholder agriculture. I would like to draw attention to FARM-Africa's work in rural finance provision in five different locations in Ethiopia where community based savings schemes have had great success in reaching households that were previously excluded from this market. Working across five different locations in rural Ethiopia, FARM-Africa supported the establishment of a network of 137 women's groups. The groups formed around the concept of increasing their income and assets through ownership of goats. The initial credit concept is an in-kind system, where breeding animals are provided to the women of carefully selected poor, usually female-headed households and offspring are then paid back to the group so that new members can receive further goat loans. Group members quickly took advantage of the fact that, with an increased asset endowment in the form of small livestock and improved business development skills provided by the project, they could establish a revolving fund to provide microcredit to diversify their sources of income. As each group member had paid a small insurance deposit for their animals, these together with group savings are used to set up bank accounts. FARM-Africa then provides a matching grant, of Birr 700 to Birr 4,500 per group (£60 to £375). Credit schemes are operated by advancing loans to group members to undertake various commercial activities. Groups have chosen different methods of doing this; some divided all available funds between all members, others provided larger loans to a few members at a time in rotation. Loan durations have commonly varied from 3-6 months with loan amounts between Birr 50 and Birr 200. Interest rates have typically been 10% for the loan period. Some groups insisted on full repayment of all loans before the next round is undertaken, while others did not. Peer pressure within groups then helps to ensure full repayment while administration and tracking of funds is simplified. A recent study (Hendy, 2002) has shown that the use of loans has varied between locations. Throughout all zones, trading of local agricultural commodities has been the most common activity. This has been conducted either by purchasing commodities in farming areas and transporting to markets, or by buying and selling within markets (splitting bulk purchases for retail marketing). Commodities traded in these ways have included grains, coffee, vegetables, ghee, sugar cane, chillies, hops, honey, chat and livestock. In some cases, sorting and grading of crop produce has provided additional added value (for example of chillies). Other activities have included growing short-duration crops such as vegetables, fattening sheep or goats, spinning and weaving cloth, brewing beer and distilling spirit. Almost all women claim to have made profits (commonly 50-100% of the loan) from the activities they have carried out. No women admitted making losses and there has been 100% repayment of loans and interest in most cases. Where women have had repayment difficulties, repayment periods have been extended, and loans generally repaid in the extra time. Profits have usually been greatest from crop commodity trading and least from livestock trading or fattening (with greater risks and seasonal constraints). For your information, the full text of the policy document entitled: 'Reaching the Poor A Call to Action' can be found on the FARM-Africa website at www.farmafrica.org.uk <http://www.farmafrica.org.uk> and it is hoped that it will be posted shortly on the DFID e-forum website. Alastair Bradstock FARM-Africa ============================================================= To send a reply to this message that goes to all list members, make sure that you send your reply to <address removed> To unsubscribe from this list, send an email to "<address removed>", with the message body: unsubscribe economic-opportunity <your-email-address>
Please visit dfid-agriculture-consultation.nri.org.