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 Front Cover
 Title Page
 Table of Contents
 List of abbreviations
 Introduction and background
 Analysis of credit schemes for...
 Credit schemes in various...
 Conclusions on future actions for...
 Tables
 Back Cover














Title: Analysis of credit schemes benefitting rural women in selected African countries
CITATION THUMBNAILS PAGE IMAGE ZOOMABLE
Full Citation
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Permanent Link: http://ufdc.ufl.edu/UF00084630/00001
 Material Information
Title: Analysis of credit schemes benefitting rural women in selected African countries
Physical Description: ii, 44 leaves : ; 30 cm.
Language: English
Creator: Food and Agriculture Organization of the United Nations
Publisher: Food and Agriculture Organization of the United Nations
Place of Publication: Rome
Publication Date: 1988
 Subjects
Subject: Credit, Agricultural -- Women -- Africa   ( ltcsh )
Rural women -- Africa   ( lcsh )
Agricultural credit -- Case studies -- Africa   ( lcsh )
Women in agriculture -- Africa   ( lcsh )
Genre: international intergovernmental publication   ( marcgt )
non-fiction   ( marcgt )
Spatial Coverage: Kenya
Malawi
Sierra Leone
Zambia
Zimbabwe
 Record Information
Bibliographic ID: UF00084630
Volume ID: VID00001
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 31716875

Table of Contents
    Front Cover
        Front Cover
    Title Page
        Title Page
    Table of Contents
        Table of Contents 1
        Table of Contents 2
    List of abbreviations
        Page i
        Page ii
    Introduction and background
        Page 1
        Page 2
    Analysis of credit schemes for women farmers
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
    Credit schemes in various countries
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
        Page 27
        Page 28
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
        Page 34
        Page 35
        Page 36
        Page 37
        Page 38
        Page 39
        Page 40
    Conclusions on future actions for providing credit for rural women
        Page 41
        Page 42
        Page 43
        Page 44
    Tables
        Page 45
        Page 46
        Page 47
        Page 48
        Page 49
        Page 50
        Page 51
        Page 52
    Back Cover
        Page 53
Full Text








ANALYSIS OF CREDIT SCHEMES
BENEFITING RURAL WOMEN
IN SELECTED AFRICAN COUNTRIES




















FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS
























ANALYSIS OF CREDIT SCHEMES BENEFITING RURAL WOMEN

IN SELECTED AFRICAN COUNTRIES


































FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS
Rome, 1988









TABLE OF CONTENTS


PAGE


S INTRODUCTION AND BACKGROUND

1.1 Aim and scope of the study 1
1.2 Definition of women's credit projects 2
1.3 Constraints on women's access to credit 2

2 ANALYSIS OF CREDIT SCHEMES BENEFITING WOMEN FARMERS

2.1 Types of institutions and schemes 3
2.2 Issues involved in developing credit schemes 5
for women

2.2.1 Conceptual issues 5
2.2.2 Institutional issues 7
2.2.3 Project-related issues 11

3 CREDIT SCHEMES IN VARIOUS COUNTRIES

3.1 Kenya 14

3.1.1 Types of credit available 14
3.1.2 Government credit schemes 15
3.1.3 The Kenya Women's Finance Trust 16
3.1.4 Project for People's Participation in 17
Rural Development

3.2 Malawi 18

3.2.1 Main financial institutions 18
3.2.2 The MOA's credit scheme 20

3.3 Sierra Leone 23

3.3.1 Credit systems 23
3.3.2 Yoni Rural Bank 25
3.3.3 Integrated agricultural development 27
projects
3.3.4 People's Participation in Rural 28
Development

3.4 Zambia 29

3.4.1 Types of credit institutions 29
3.4.2 Zambia Cooperative Federation-Financial 30
Services
3.4.3 Barclays Bank scheme 35







ii -
PAGE

3.5 Zimbabwe 36

3.5.1 Credit institutions 36
3.5.2 Savings clubs 37
3.5.3 The role of non-governmental 37
organizations
3.5.4 Formal credit 38
3.5.5 Community Development Fund 40
3.5.6 Trust fund projects 41

4 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 41





List of tables and charts

Table 1 Schemes examined in the study
Table 2 Credit projects and disbursements
to women
Table 3 Comparative analysis of credit schemes
Table 4 Number of borrowers, disbursements and
recoveries in some Zambian credit schemes
Chart 1 Credit application timetable of ZCF-FS










ABBREVIATIONS


ADD Agriculture Development Division
ADF Agricultural Development Fund
ADMARC Agricultural Development and Marketing Corporation
AFC Agricultural Finance Corporation
AGRITEX Ministry of Agriculture extension workers
AO Agricultural officer
APO Agricultural project officer
BOSL Bank of Sierra Leone
CA Communal areas
CADEC Mission for Social Services and Development (now CSDO)
CADRW Community Action for Development of Rural Women
CAS Controller of Agricultural Services
CB Commercial bank
CBK Cooperative Bank of Kenya
CCS Cooperative credit scheme
CDF Community development fund
CDO Community development officer
CDW Community development worker
CGS Credit guarantee scheme
CMB Cotton marketing board
CSD Commercial Service Department
CSDO Mission for Social Services and Development
DAHI Department of Animal Health and Industry
DAO District agricultural officer
DCDO District community development officer
EIADP Eastern Integrated Agricultural Development Project
EPA Extension Planning Area
FFC Farmers' Finance Company
FHA Farm home assistant
FINNIDA Finnish International Development Agency
FY Fiscal year
GCRF Guarantee-cum-risk fund
GLB Government Loans Board
GMB Grain marketing board
ha Hectare(s)
IADP Integrated Agricultural Development Project
IFAD International Fund for Agricultural Development
KCGU Kenya Grain Growers' Union
KWFT Kenya Women's Finance Trust
LPO Local purchase order
MANR Ministry of Agriculture and Natural Resources
MAWD Ministry of Agriculture and Water Development
MCDWA Ministry of Community Development and Women's Affairs
MOA Ministry of Agriculture
MOALD Ministry of Agriculture and Livestock Development
MOCD Ministry of Cooperative Development
NAMBOARD National Marketing Board
NBK National Bank of Kenya
NGO Non-governmental organization
NLFP National Lima Fertilizer Programme
NORAD Norwegian Agency for Development
NRDP Natural Rural Development Programme







- ii -


NSCS New Season Credit Scheme
NWIADP North West Integrated Agricultural Development Project
PACO Principal agricultural credit officer
PFP Partnership for Productivity
PPP People's Participation Project
RB Rural bank
RDP Rural development project
ROSCA Rotating savings credit associations)
SDM Savings and Development Movement
SFO Small farm operations
SH Silveira House
SIDA Swedish International Development Agency
SSF Settlement Schemes Fund
WPRD Women's Programme for Rural Development
YRB Yoni Rural Bank
ZABD Zambia Agricultural Development Bank
ZCF Zambia Cooperative Federation
ZCF-FS Zambia Cooperative Federation Financial Services












CREDIT SCHEMES FOR RURAL WOMEN


1. INTRODUCTION AND BACKGROUND

1.1 Aim and scope of the study

The role of rural women in agricultural production has for some
years now been recognized and well documented. Nevertheless, partly
because the governments in many countries are in financial difficulties and
partly because donor funding to support women's activities has not been
concerted, women are still not getting adequate support, for instance, to
help them increase their income from agricultural production. Agricultural
support services, notably extension, credit, research in women's crop
production and assistance in marketing, are generally lacking.

The aim of this study, which was carried out in five African
countries Kenya, Malawi, Sierra Leone, Zambia and Zimbabwe from
November 1986 to January 1987, is to review credit projects to identify
factors contributing to the success of those that have prospered and the
limitations of those that have been less effective. The ultimate
objective is to develop suitable approaches and techniques for providing
credit for women farmers.

At this juncture, it should be said that credit is far too often
viewed as a panacea for development difficulties. In reality, it is just
another important input aimed at increasing production. The success of a
credit project, while considerably dependent upon its own administration,
is equally reliant on other factors that are not necessarily within the
control of the credit delivery mechanism. In agricultural credit, for
instance, access to proven packages of technology supported by timely
delivery of inputs, extension, satisfactory marketing arrangements and
primarily, the political will to enforce recoveries, are also important for
increased production and the development of credit institutions and schemes
that are sustainable.

While inter-country comparisons can shed light on factors
contributing to success, no dogmatic statements can be made about the
replicability of projects from one country to another, principally because
of different cultural factors, variations in input supplies, marketing,
research, prices and price support for crops, which affect the successful
production of crops and the effectiveness of technical advice. Where
women are concerned, social considerations, legal limitations and the
prevalence of traditional attitudes to their role (at times even reflected
in the attitudes of institution managers while policy may dictate
otherwise), make generalizations on the replicability of credit projects
untenable. This is not to say that the successful elements of credit
projects cannot be pinpointed, but before projects are designed and the
appropriate institutions selected to administer the credit component,
considerable effort must be made to analyse the particular legal,
political, social and administrative environments.







- 2 -


The study is confined to evaluating ongoing projects, the lessons
learnt and the implications for future intervention. It does not address
itself to either the demand for credit, the impact of the projects on the
beneficiaries or monitoring and evaluation aspects.

In total, 21 credit schemes were reviewed in the five countries.
The schemes fell into three broad categories: (1) those specifically
sponsored by women's organizations as in Kenya; (2) those not sponsored by
any agencies but in which women receive credit albeit on a minority basis;
and (3) those sponsored by international organizations in which a conscious
decision had been made to promote lending to women either exclusively or in
mixed groups. A list of the schemes by country is summarized in Table 1.

1.2 Definition of women's credit projects

The definition of a "women's credit project" can be complex. At
one extreme, credit extended to males can be claimed to benefit families
and therefore also the women members. By contrast, women may borrow in
their own right even if the consent of their husbands is sought. In some
projects women's groups have male members. At times projects have mixed
groups. The question arises: should a 5-15 percent male participation in
a women's group qualify it for a women's credit project? Again, small
numbers of women may borrow in their individual capacity in a number of
agricultural projects whose target group is not gender-specific. Should
such borrowers be excluded from the study? To simplify these problems of
definition, a woman borrower is here classified as one who has signed for a
loan in her individual capacity. No attempt has been made to draw fine
distinctions in the proportion of women's participation in a project,
particularly as the administration of schemes for women and for men is
identical.

1.3 Constraints on women's access to credit

The factors that inhibit women's access to credit have been
broadly identified as follows:

(a) General lack of awareness of credit facilities which is further
exacerbated by illiteracy;

(b) Lack of collateral and stringent lending terms including, at
times, consent from husbands;

(c) Heavy workload arising from production-related activities combined
with domestic duties, leaving little time to travel to financial
institutions;

(d) Proceeds from sales at times going to husbands, a disincentive to
increasing production;

(e) Membership of cooperatives at times being limited to people who
own land;

(f) Extension services orientated toward males. Women's extension
services are orientated toward nutrition and home economics with
inadequate emphasis on income-generating activities. Women are
handicapped by poverty, inadequate training and lack of mobility;







-3-


(g) Lack of funds for exclusively women's projects;

(h) Poor infrastructure in rural areas leading to lack of banking
services, high transport costs and poor marketing facilities.

While some of these constraints apply to rural communities in
general, and not necessarily women in particular, it should be recognized
that in view of the difficulties faced by women, certain modifications in
credit schemes aimed at them become particularly relevant. Firstly, in
view of the heavy workload borne by women, their loan packages,
particularly those targeted at households headed by females, should have a
higher provision for financing the labour required to prepare land. In
most schemes, even those aimed exclusively at women, no such provision has
been made. Secondly, credit schemes for women, while incorporating
training for them, should also include a training component for husbands to
ensure that in solving one set of social problems, projects do not create
another.

2. ANALYSIS OF CREDIT SCHEMES FOR WOMEN FARMERS

2.1 Types of institutions and schemes

Agricultural credit as opposed to credit for off-farm activities
was the principal focus of the schemes reviewed, although in the case of
Barclays Bank Kenya and the Kenya Women's Finance Trust (KWFT), financing
was primarily of off-farm activities in urban areas.

The schemes used a wide array of types of intermediaries to
administer the credit (see Table 2) depending on historical development
within the individual countries. In some instances, particularly where the
credit component was relatively insignificant, any institution was used
that would agree to administer the funds. 1/ Four of the schemes fall
into an unspecified category. Here the institutions for channelling credit
were selected (or in the process of being selected) only after project
implementation started.

As summarized in.Table 2, the choice of institution ranged from
commercial banks, which are generally conservative lenders, to non-bank
financial institutions, which are generally owned by governments and lend
to the higher risk elements in the spectrum. In the four schemes operated
by commercial banks, only one, Barclays Zambia, had a scheme for small- to
medium-scale farmers (minimum 4 ha) at its own risk. In most of the other
schemes the financial institution preferred to lend at the risk of the
governments or donors. In each country, however, there was one major
institution that lent to smallholders at its own risk. It usually operated
a scheme in which women borrowed in their own right, although the
proportion of women borrowers remained low.



1/ Some small Trust Fund pilot projects administered by FAO fell into this
group, but although they contained a significant credit component, they
were not designed specifically as credit projects.







-4-


Few institutions operated exclusively women's schemes at their
own risk, the notable exceptions being the KWFT and the Agricultural
Finance Corporation (AFC) in Kenya, the AFC in Zimbabwe and the Ministry of
Agriculture (MOA) in Malawi, despite the fact that almost all bankers
admitted that women were a better credit risk than their male counterparts.
By and large, women have received less than 10 percent of the credit
directed to smallholders and 1 percent of the total credit to agriculture
in the countries covered by the study. The only country in which there was
comparable statistical evidence was Malawi, where the MOA runs identical
schemes for mixed groups and for exclusively women's groups. Even in these
schemes, statistical comparisons can be misleading. Although almost all
variables were identical the results should be treated cautiously as
smaller schemes, particularly those recently introduced, usually have
better repayment records than older ones. This analytical flaw
notwithstanding, women have generally shown a 7-10 percent better repayment
record than men in Malawi. The credit staff in Malawi stressed the point
that even in mixed groups women seemed to be more conscientious about loan
repayments. They also said that if a strict gender analysis were made,
women's repayment record would be better than the 7-10 percent performance
indicated by the figures. If such perceptions are broad-based the issue
remains: why do bankers not allocate greater resources to women?

The brief section on constraints (section 1.3) has already
mentioned the various factors that contribute to this problem. One of them
may be briefly enlarged upon here: the lack of concentrated funding that,
besides addressing financial constraints, would illuminate government
policy on women's programmes. In Malawi, for example, a conscious
national decision was taken to encourage women's participation in the
National Rural Development Programme. In other countries few efforts have
been made to change national policy on this issue. Bankers' attitudes
remain traditional.

The international agencies have tried to encourage lending to
rural women. In the early nineteen eighties pilot projects were developed
in all the countries to initiate credit programmes for women. Their
success was supposed to be catalytic, generating interest in women's
programmes, but available funds were limited. The nine projects concerned
committed in total some US$1.2 million for credit. When this is compared
with the resources of financial institutions for instance, the AFC
Zimbabwe disburses some US$1.7 million per year in one scheme alone it is
easy to see why these schemes had limited policy-level impact.

Moreover some of them were located in remote parts of the
countries, such as the People's Participation Project (PPP) and Community
Action for Development of Rural Women (CADRW) in Kenya and PPP in Sierra
Leone, making them too expensive to be replicable. Because of their
remoteness and harsh agronomic conditions, the areas provided little
opportunity for developing sustainable credit schemes. Only in Malawi has
a significant breakthrough been made in attitudes to developing a programme
for women's credit.

Clearly, donors or governments must seriously consider
alternative strategies with real financial incentives. A concerted
programme could have a more significant impact on changing policies and
attitudes than the piecemeal approach hitherto adopted.






- 5-


2.2 Issues involved in developing credit schemes for women

The issues which arise with respect to the development of credit
schemes for women can be broadly classified as conceptual, institutional
and project-related. While these broad-based issues are addressed,
however, it must be borne in mind that most governments in developing
countries, even those considered to be well managed, are facing heavy
financial constraints resulting in severe cut-backs in development
programmes, limitations on staff expansion and even cut-backs in existing
staff. Resources that existed or were presumed to exist even five years
ago are simply not there. For the foreseeable future at least, prudent
development programmes should aim at keeping the government's incremental
commitments to a minimum.

2.2.1 Conceptual issues

In dealing with conceptual issues efforts were made to learn from
the experiences of the countries under study as well as from other
unrelated projects.

2.2.1.1 Development of separate financial institutions for women

A number of factors favour development of separate institutions:
the ease of dealing with other women, having their understanding and
support in linking the design of credit to women's needs, and perhaps the
easing of collateral requirements. Such measures can, however, be
accompanied by:

(a) The risks of developing new institutions with all the attendant
problems of staffing, training, and development of management.
Development of sound institutions is a time-consuming process.
The experience of the KWFT, which faces some financial
difficulties, highlights the fact that it may take a long time
before an institution of this kind can develop fully. Even if the
KWFT became a separate body with a wide network of branches the
question would arise whether it would have the necessary resources
to meet the financial and training needs of all women. It would
therefore appear more appropriate to utilize existing resources
and provide the necessary financial support for the modification
and implementation of national policies benefiting the sector;

(b) Difficulties in providing the finance, particularly from local
sources, to develop new institutions. Arguments have often been
put forward that the successful savings and development movement
in Zimbabwe which reportedly taps some Z$4 million to 5 million 1/
in annual savings should provide the basis for developing an
autonomous women's bank. To be viable, this would have to develop
a separate institutional mechanism to mobilize all the resources
presently tapped by a wide network of building societies and post


1/ Z$1.60 = US$1 (rate on 1.10.86)






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offices. The following questions arise: (1) would rural women
travel long distances to make their deposits available to a
separate women's bank or would they simply deposit funds at the
nearest convenient outlet? (2) if women choose to deposit their
resources at the nearest location, might it not be better policy
somehow to harness these resources to influence the AFC's policies
on women rather than to develop a separate institution?

It may be added that the AFC Zimbabwe which receives
administrative and risk subsidies for lending to smallholders may be more
inclined to waive considerations of collateral than a separate women's
bank. As a commercial bank that used deposits and stockholders' funds to
support lending, the institution would be no less averse to risk than any
other commercial bank. Rural women might not have the collateral to
comply with its requirements.

On balance the experience of Malawi indicates that it is more
expedient to utilize existing institutions than to develop new ones.

2.2.1.2 Development of separate schemes using existing resources

This approach is considerably favoured by international
organizations and bilaterally assisted projects. It is commonly argued
that women, facing discrimination from lenders and for social reasons shy
of speaking up in mixed groups, need a separate source of funds to meet
their needs. The experience of the International Fund for Agricultural
Development (IFAD) indicates that where a separate funding mechanism is
provided, women's access to other resources often gets cut off. As funds
from externally financed projects are often limited, it is more appropriate
for institutions to aim for policies and measures that incorporate women
into existing arrangements (for instance, by increasing women's
participation in farmers' groups) than to develop separate funding for
exclusively women's groups.

Malawi has been promoting mixed groups since 1980/81. Some
40 000 women receive credit, of whom 2 000 are in women's groups, while
another 38 000 receive credit and extension advice in mixed groups. About
900 exclusively women's groups have been formed comprising some 9 000-10
000 members. Their access to credit is limited, however, because inter
alia, funds are short and there is a tendency to finance existing clients
rather than new ones. Here too, expediency dictates that projects should
aim at increasing women's participation rather than at creating separate
funding sources. Moreover, governments more readily support increased
participation in mixed groups than attempts to set up separate sources
which they may regard as tending to alter the social structure.

2.2.1.3 Female extension services and linkages with other institutions

Lack of mobility and inadequately trained and staffed female
extension staff have often been cited as major constraints on women's
access to credit. Moreover, women's extension services have traditionally
undertaken the provision of training in home economics and nutrition.
Rather belatedly, it is being realized that development of a predominantly
male extension service with emphasis on agricultural production and a
women's service with emphasis on nutrition has left a vacuum in which
women's role in agricultural production has not been fully recognized.






-7-


Malawi altered its policies and broadened its male-dominated
extension services to include women in farmers' groups. While women may
not entirely benefit from this arrangement and it may prove less than
satisfactory because of social reasons, so far the system appears to have
worked, in the sense that more women have been reached. Farm home
assistants (FHAs) in Malawi are understaffed and less mobile than their
male counterparts, however. Lack of financial resources, the low numbers
of women taking extension courses and the inability to train FHAs rapidly
to provide specialist production advice to women farmers make it expedient
for women's schemes to use existing resources rather than to develop new
ones.

2.2.2 Institutional issues

Choosing the right institution is important to the success of a
scheme. In the case of a women's programme, the attitude of the
institution to women's credit and collateral requirements is a variable in
determining whether or not the institution is appropriate for administering
the scheme. The experience of a project with a financial institution in
one country perhaps best illustrates this. The project after some search
placed US$50 000 as guarantee-cum-risk fund on unfavourable terms with a
bank. The latter was to lend some 85 percent of the money against the risk
fund. The responsibility for processing applications, screening the
borrowers, processing and administering the scheme, rested with the
project. The bank acted purely as a rubber-stamping institution. It did
not risk its own capital (so was less concerned for the success of the
scheme) nor did the novel approach of the project contribute to the bank's
experience in dealing with small farmers.

No general conclusions can be drawn about the types of
institutional mechanisms and their efficiency. Cooperatives or ministry-
operated schemes are more successful in some countries than in others.
Non-bank financial institutions specialized in credit should be better at
channelling credit than ministry-operated schemes, but in fact have proved
less effective in some countries. Careful assessment of the institutions
might range from assessment of organizational structure, staff morale,
workload, training programmes, lending policies and procedures and
operating controls, to analysis of the financial condition of the
institutions. The degree and depth of analysis would depend upon the
objectives of the credit programme which should, at a minimum, attempt to
ensure that loan administration procedures were sound. In this context the
following factors are critical:

(a) Financial viability

Bankers are in general reluctant to lend to smallholders because
of high operating costs. Smallholder lending costs inclusive of
salaries, other operating costs and provision for bad debts can
range between 10 percent and 20 percent of the average loan
portfolio. A lending institution has to cover those costs with
the margin between its borrowing and lending rates. These costs
are high because (1) the loans are small and (2) the institutions
have to operate in remote areas with poor communications and
infrastructure. In designing projects, donors have to allow
intermediaries a proper interest spread and at the same time






- 8 -


ensure that lending rates are compatible with those in other
sectors of the economy, to avoid diversion of resources away from
agriculture, the major occupation in rural areas. Unless
institutions can cover their expenses and make profits they have
little interest in lending to this high-cost sector. For
altruistic reasons governments have tended to keep lending rates
lower here than in other sectors of the economy. This has been
an added disincentive to intermediary institutions channelling the
credit;

(b) Identification of credit-worthy borrowers

Staff should be motivated and have the necessary time, inclination
and training to identify credit-worthy borrowers. Staff should
moreover be sufficiently trained in agronomy to assess the
suitability of the soil for growing crops. Inadequate attention
to this matter of identification has contributed to low recovery
rates in many credit schemes. The failure of schemes and the
problems in recovering loans in integrated agricultural
development projects (IADPs) in Sierra Leone and the AFC in
Zimbabwe can be directly attributed to lack of attention to this
important consideration. At times institutions/schemes rely on
the extension service to identify borrowers. This resort
sometimes fails because the extension service is usually judged by
the number of farmers reached and is not motivated to ensure that
borrowers are bona fide and will repay the loans. Linkages of
credit staff with extension are essential, however, and should be
encouraged through joint seminars and training. If for some
reason it becomes necessary to use the project/extension staff to
identify borrowers, the institution must be given the right to
reject applications;

(c) Loan appraisal

Staff of the institution should be able to evaluate the
profitability of ventures to ensure that loans are extended for
viable projects only. Poor staff training in appraisal can lead
to poor loan recoveries. Appraisal of seasonal loans is a more or
less mechanical procedure. Such loans are extended in packages
that are reviewed by the Ministry of Agriculture in most
countries. In case of other loans, however, familiarity with the
business conditions, business environment, markets, availability
of inputs, spares, etc., is critical. Most staff of development
institutions lack this knowledge. Commercial bankers are more
familiar with it.

(d) Loan approval procedures

Approval procedures should be suitably decentralized. In a
number of institutions complex procedures lead to delays in
processing. In the case of seasonal loans, timely loan approvals
linked to timely availability of inputs are critical in ensuring
that farmers get maximum benefit from their loans. The following
considerations are important in getting loans approved on time:







-9 -


(i) Timely knowledge of farmers' previous repayment record

Excessively centralized procedures can lead to poor
repayments, as in the case of one country where repayments
are linked to sales through the marketing boards. The
latter pay by cheque and the institution is not abreast of
the repayment record of the borrowers until late in its
loan processing season;

(ii) Potential of the land, profitability of the venture

Most institutions develop seasonal loan packages in
conjunction with extension services. Soil conditions
permitting (the loan officers of institutions should be
able to judge these, or use the extension service to do
so), the appraisal of loans should be relatively simple;

(iii) Authority of branch managers to approve loans

In some instances branch managers cannot approve loans at
all. There are unnecessary delays when every application
has to be sent to headquarters for approval. On the other
hand, decentralized approval must be accompanied by
appropriate checks and balances within the system. To
avoid misuse of approval authority, headquarters must have
a strong internal audit department. To avoid poor loan
appraisal branch managers must be suitably trained.

The approval procedures may be complex but loans can still
be approved on time. This point is borne out by the
experience of one institution which has one of the most
complex approval procedures in the study (see section
3.2.2). The institution has nevertheless been able to
ensure timeliness by conforming to a tight schedule. By
contrast, another institution (section 3.1.2) which has
strong marketing links with commodity boards has relatively
simply loan approval procedures but delays occur because of
reliance on the marketing boards to credit the sales to
borrowers' accounts, with consequent delays in approving
loans for the following season. Marketing linkages can,
however, yield good results in enforcing recoveries when
payment procedures are decentralized.

In Malawi the marketing board pays the farmers in cash,
thus saving considerable expense and time. Borrowers can
then repay the credit section of the MOA and loan
processing can continue for the following season;

(e) Loan disbursements

The timing of loan disbursements can be as critical as approval.
Sometimes disbursements are so delayed that by the time the loan
is available, the selling points have run out of stock.
Fertilizers seldom arrive on time. In one country, farmers have







- 10 -


sometimes received inputs in the middle of the crop season, with
unfavourable repercussions.

A number of schemes disburse inputs in kind, the rationale being
that farmers should not misuse the credit. In reality, inputs in
kind can be and are, in some countries, easily diverted. If
farmers need the cash they will sell the inputs.

There is no obvious link between disbursement in kind and better
loan recoveries. Commercial banks mostly disburse loans in cash
and can get good recoveries. On the other hand, other
institutions disburse in kind and get equally good recoveries.
The choice of disbursement should be left to appraisal teams.
Where there are chronic delays in inputs it may be more
appropriate to disburse the loan in cash. When this method is
chosen, however, loans should be complemented by an effective
programme of supervision.

Only one lending institution follows the sensible practice of
issuing purchase orders with expiry dates, recognizing that beyond
a certain date inputs are useless;

(f) Disbursement in trenches

Some schemes release their loans in trenches, the rationale being
that farmers should get the next phase of a loan only if the first
tranche has been well used. Thus, funds for seeds and fertilizers
are released only if the land is well prepared. On paper this is
a sound approach. In practice excessive controls can lead to (1)
corrupt practices and (2) delays in the release of necessary funds
if the staff have a heavy workload.

A commercial bank follows the tranche procedure but enjoys certain
advantages that most government-owned financial institutions
cannot afford. Its staff, who are paid three times the local
salaries, are all mobile. Each staff member deals with no more
than 150 farmers.

Disbursement in trenches is a sound idea but must be followed
judiciously;

(g) Loan supervision

Supervision is the most ignored element of a credit scheme but one
of the most important. Informal credit succeeds because lenders
maintain constant contact with borrowers. Proper supervision of
a credit scheme ensures: (1) knowledge of the farmer; (2)
understanding of his problems and helping out where necessary. A
rural bank encountered in the study followed the practice of
supervising and assisting farmers, with considerable success.
Given this kind of support the farmers feel a close relationship
with the institution; (3) suspension of further disbursements







- 11 -


should the crop appear to be failing. This avoids putting the
farmer in debt; or (4) timely rescheduling of the debt.
Institutions following rigid procedures make few attempts to
reschedule repayments. As a result farmers who face mounting debt
by-pass the system by selling their produce under different names.
Proper supervision would avoid these developments; (5) visits by
the supervisor to the farmers at harvest, so that he can see how
much the latter produce. Such visits are essential. All local
moneylenders follow this practice. In one country in the study
credit staff sit in the local market and observe what the
borrowers are selling;

(h) Loan collection and follow-up

If credit schemes are to succeed, then borrowers who have
defaulted and whose debts have not been rescheduled must be dealt
with firmly. Failing this, the credit discipline breaks down.

Follow-up on overdue loans requires a regular system of monitoring
and a prescribed course of action. Collection notices and
reminders must be sent or delivered at regular intervals.
Discussions must be held with borrowers to settle the accounts,
failing which, legal action must be initiated. No credit scheme
can function well without this important proviso;

(i) Monitoring, information systems and loan accounting

A large institution needs proper documentation, loan accounting
and an information system that informs the management on follow-up
and any problems in administration.

2.3.2 Project-related issues

Of the 21 schemes in the study ten were funded by specific
projects. They included three PPP schemes, (Sierra Leone, Kenya,
Zimbabwe), three CADRW schemes (Kenya, Zimbabwe), two bilateral assistance
schemes, (SIDA, FINNIDA) in Zambia, one National Lima Fertilizer Programme
(NLFP) scheme administered by FAO in Zambia, and one Unesco-funded scheme
in Malawi. With the exception of the scheme in Malawi, which was
completely administered by the MOA in conformity with the ministry's
policies and procedures, most schemes have a similar .pattern in their
design. Essentially they seek to promote women's groups which are given
technical training. At times in the CADRW and PPP projects savings are
encouraged. PPP projects provide a guarantee-cum-risk fund to cover the
lending risk to the institutions. Others place funds, usually in the form
of grants, with lending institutions to lend to their target sector.

Arrangements for providing technical support vary considerably
among the schemes. Some (FINNIDA, SIDA, CADRW, NLFP) seek to utilize
existing arrangements in which the staff of line ministries are used to
encourage group formation and to provide technical advice. The activities
of such programmes are coordinated by a national coordinator who relies







- 12 -


on district staff and the field staff of the line ministries. The latter
work part-time on the projects, not as in the PPP projects which have the
following characteristics: (1) the group promoters are attached to
projects full-time; (2) PPPs encourage savings and try to follow the more
sensitive ground-upward approach in group formation; (3) PPPs rely on
extension services or sometimes assign their own staff to provide technical
support.

The design of the projects includes the following elements:

2.2.3.1 Timely and proper choice of the institution

The importance of selecting the proper national institution within
the country has already been stressed in section 2.2.2. At times, the
projects did not select their financial institutions for channelling.funds
in advance. The institutions are selected mid-way through project
implementation, at times on disadvantageous terms, leaving little time for
effective implementation of the credit component.

2.2.3.2 Adaptation of project design to operating procedures of
institutions

Unless there are strong reasons, changes in the procedures of
institutions to suit project design are not advisable. Instead, efforts
should be made to adapt the project design to procedures and policies of
the institutions. The experiences of two projects in the same country bear
this out. One project opted for developing groups in order to deal with
the cooperative system; the other formed groups who then became members of
societies. As the areas of responsibilities between unions and project
staff were not clearly defined in the former project considerable problems
arose in loan administration (see section 3.4.2.2).

2.2.3.3 Group formation

All the projects promoted groups to handle credit on a joint-and-
several-liability basis. Besides being cheaper to administer, there are a
number of advantages in this approach:

(a) The selection of credit-worthy borrowers is left to the community
which knows its members best;

(b) Learning is quicker;

(c) Groups are more egalitarian in nature;

(d) Group savings are left in the groups. Women are thus cushioned
against impoundment of funds by husbands;

(e) When there are individual defaults, peer pressure is brought to
bear on the defaulters. Quite often projects drop defaulting
members and provide credit to the better-performing ones. This is
a mistake. The experiences of two projects in one country
supported this conclusion. One project rigidly followed the
practice of disqualifying the whole group, if one member defaulted
(see section 3.3.3). Its recovery performance was better than
that of the other project; members understood their
responsibilities early.






- 13 -


For group credit to be effective, there must be group cohesion.
At times projects look to credit to act as a catalyst in creating groups.
This is a false expectation. Groups must be cohesive in their own right
and must demonstrate their ability to work, save and act together in a
common cause. More importantly, groups should have joint savings as this
contributes to cohesion. Groups with these characteristics constitute a
better risk than those who come together to get credit (see section
3.4.2.2).

It takes a long time to form a group. It needs training,
frequent contact and sensitivity on the part of the community worker.
Groups carefully formed can have lasting impact. Projects with group
credit must therefore be of longer duration and must strongly emphasize
group formation and training as a major support element in their design.
NGOs have generally proved effective in forming groups.

2.2.3.4 Grants followed by credit

Some projects give fertilizers and seed to groups to encourage
them to learn at a joint demonstration plot. In subsequent years the same
groups are given credit on a joint-and-individual-liability basis to
finance seasonal inputs for individual plots. Such an approach is sound
in one sense, as people should be given credit only after they have learnt
to follow good agricultural practices. Unfortunately mixing of grants and
credit can create confusion. If credit is the ultimate object, grants
should be suspended. People should be given a training course in credit
(as practised by one successful credit project) and, other factors being
equal, they should then be provided with credit directly.

2.2.3.5 Education of borrowers

Education in the obligations of credit is important and should be
encouraged. The Zambia Cooperative Federation Financial Services
(ZCF-FS) has followed this practice with good results.

2.2.3.6 Viability of activities

Most projects reviewed during this study did not assess in advance
the economic viability of the activity to be financed. Viability is
important if the loan is to be repaid and if the objective of improving
farmers' incomes is to be met. Unless the activity yields products that
can be sold in sufficient quantities to leave a net profit to the
borrowers, repayments may be poor.

2.2.3.7 Coordination with extension

In all the projects it was recognized that provision of sound
technical advice was important to obtain increased income. Besides the
establishing of committees, however, no mechanism for ensuring
coordination was provided.

In most countries extension staff are seldom motivated and even
more rarely mobile. Unless some financial inducements are built into the
scheme, coordination will in actual practice seldom extend beyond the
committee level.






- 14 -


2.2.3.8 Mobility of project staff

Staff mobility is seldom provided for in project design. If
projects are to succeed, staff, particularly community workers, must follow
strict schedules to meet beneficiaries at regular intervals to provide
training, encourage group cohesiveness and develop group leadership.
Unless staff are mobile, they have little incentive or the means to ensure
continuous contact.

2.2.3.9 Continuation and replicability of schemes

Schemes must be able to continue once donor funding is withdrawn.
To this end, emphasis should be placed on utilizing and training existing
staff of line ministries, promoting linkages among ministries, and most
importantly, developing groups that by the end of the project have learnt
to deal directly with the financial institution and extension staff. Too
often project staff assist beneficiaries in all phases of implementation
and loan administration. While such measures may be necessary in the
initial stages, by the time groups reach the second or third year of their
operations they should be able to arrange for input supplies, deal with or
demand extension advice and arrange for the marketing of their produce.
The administrative costs of schemes in which the project staff undertake
functions which should be carried out by the beneficiaries themselves are
excessive primarily because of these services. Such schemes cannot be
replicated.

3. CREDIT SCHEMES IN VARIOUS COUNTRIES

3.1 KENYA

3.1.1 Types of credit available

There is a well developed network of financial institutions in
Kenya, including commercial banks and two specialized institutions for
supporting agricultural credit, the AFC and the Cooperative Bank of Kenya
(CBK).

There was an estimated KSh.7 000 million 1/ in credit outstanding
in 1984. Commercial banks with a total of approximately KSh.3 600 million
or 51 percent were by far the largest providers of this credit. Non-bank
financial institutions accounted for about another 16 percent, while
Government-related institutions provided about 72 percent.

Loans to agriculture are given at 14-19 percent, the higher figure
being the maximum that commercial banks can charge. Relatives working in
urban areas, local merchants and voluntary savings societies are a source
of informal credit. The extent to which rural needs are met through such
channels is not known. This kind of credit is used for school-fees, land
purchases and other investments.


1/ KSh.16.30 = US$1 (rate in December 1986)






- 15 -


As the data are lacking it is not clear how much institutional
credit is directed at smallholders, but it is estimated that they have less
than 25 percent of the amount outstanding. In Kenya a smallholder is
defined for credit purposes as being the owner of less than 50 ha. If
this broad definition were narrowed down to holders of 12 ha or less, it is
doubtful that credit outstanding to this group would exceed 10 percent of
the total. The Government is aware of the problem and the AFC, which has
hitherto concentrated on lending to farmers with larger holdings, is now
increasing its loans to smallholders. Within these limits women's access
to credit would be even more restricted. Kenyan bankers are conservative.
Unregistered groups which, unlike cooperatives, are not legally recognized
bodies, would be ineligible for borrowing. Group credit which has proved
successful in Malawi and other parts of Africa could not be given in Kenya
until recently, when the AFC started to extend it to women; but they still
face difficulties in obtaining it.

In spite of these problems women's credit has been promoted
through the Kenya Women's Finance Trust (KWFT), a Women's World banking
affiliate registered in May 1982 as a non-profit organization. Group
lending has been encouraged through an FAO-administered People's
Participation Project (48 percent participation by women) in Kakamega.

It may be mentioned here that the Government, concerned by the
general lack of credit to smallholders coupled with the failure of past
credit schemes, has tried to promote agricultural lending but with limited
success. A brief description of these schemes is given below.

3.1.2 Government credit schemes

In the past, the Government introduced a Guaranteed Minimum Return
Scheme, essentially an insurance mechanism by which premiums at the rate of
KSh 5/acre were paid to insure the crops. The scheme was operated by the
Central Agricultural Board, and the AFC was an agent. False claims and
lax administration led to severe losses and the scheme was discontinued in
1978.

In 1980, aware of the need to boost agricultural production, the
Government introduced the New Seasonal Credit Scheme, designed to promote
the production of maize and wheat. Prior to recent changes the funds were
channelled through the AFC and the CBK which acted as agents. The
interest rate was 14 percent. Loans were approved by MOA extension staff
and District Commissioners, and were given at the flat rate of KSh 1 000/
acre regardless of the crop financed or the cost of production. Loans
were to be recovered through a stop-order system with the marketing boards.
The performance of the scheme was unsatisfactory, with recovery rates in
the range of 40-50 percent.

There were a number of conceptual problems in the way in which the
scheme was handled:

(a) The agents were acting on behalf of the Government. As they were
not themselves at risk, they were not as inclined to scrutinize
applications as thoroughly as they might have been with their own
funds;






- 16 -


(b) Approval by District Commissioners and MOA extension staff
resulted in bad debts; for instance, repeat loans were given to
defaulting borrowers. This contributed not only to additional
defaults but also to a general breakdown of credit discipline;

(c) The flat-rate basis regardless of production costs or individual
requirements led either to inadequate funding, contributing to
poor harvests, or to surplus funds and diversion of resources from
the agricultural sector;

(d) No mechanism existed for proper loan supervision by either the
extension staff or the financial institutions.

The relative lack of success of the New Seasonal Credit Scheme was
not atypical of various credit schemes (reportedly numbering over 20)
operated by the AFC and CBK. Aside from institutional weaknesses there
were a number of factors adversely affecting credit recovery in Kenya:

(a) Too many agencies were involved in the loan decision-making
process, which had two results: (1) loans were granted on the
basis of criteria other than strictly financial ones; and (2)
loan approval was often delayed. It was quite common for loans
to be approved in the middle of a planting season, thus becoming a
form of marketing rather than production loans;

(b) Even if loans were approved on time, input supplies might be
delivered belatedly;

(c) Payments from the marketing boards were late. The National
Cereals and Produce Board's payments were six months overdue. In
some instances, the Pyrethrum Board had not paid for two years;
the Cotton Board was on average between three and six months late;
and Kenya Creameries took three months to settle their accounts.
By and large it seemed as if the farmers financed the boards
rather than the other way around;

(d) Loan supervision needed improvement. The CBK was far removed
from the farmer. Its loans were channelled through unions and
cooperative societies which could not fully accomplish the task
because of their structure. The AFC, on the other hand, had a
staff of more than 800 and a network of 49 branches but it was
also saddled with the responsibility of handling funds in the
Government credit scheme and hence found it difficult to supervise
its own loans. The extension service which could have provided
support in this endeavour had not attained its full capacity;

(e) There was too much non-technical interference, leading to a
breakdown of credit discipline.

3.1.3 The Kenya Women's Finance Trust

The principal aim of the KWFT is to facilitate credit for women
who lack financial resources. It has two schemes, the loan scheme and the
guarantee scheme, largely confined to urban borrowers. The trust, supported
by the Ford Foundation, NORAD, the ADF, the Rural Enterprises Project and







- 17 -


Lutheran World Relief, has access to resources of approximately KSh 2
million, part of which has been contributed by Kenyan women. The KWFT
operates from headquarters in Nairobi and has a branch in Nakuru. Plans
are under way to open a rural branch in the Central Province.

3.1.4 Peoples' Participation in Rural Development, through promotion of
self help organizations (PPP)

Based on the concept that popular participation, self development
and planning from grass-roots level are effective in assisting low-income
groups, the project was located in Kakamega. There were 586 families in
the area, of whom some 260 were reached. Off these, 45 percent were women.

The project was implemented by FAO with the Ministry of
Agriculture and Livestock Development (MOALD) as the lead ministry. It
appears, however, that the MOALD did not play an active role, leaving
responsibility for implementation of the project first to Partnership For
Productivity (PFP) and subsequently, to two associate experts supported by
four group promoters. Technical support was by a NORAD volunteer. Some 21
groups benefited from the supervision and assistance provided.

PPP projects, at least those reviewed, seem designed to be
self-contained. Little assistance is required from other Government
agencies. Despite the lack of staff mobility, the supervision and
technical support of the beneficiaries were well coordinated.

In the initial phase of the project there were some problems. The
financial institution for the implementation of the credit component was
selected after the project started. In the first year credit was extended
by the PPP to some six groups. Recoveries reportedly reached 93 percent.
In the second year the balance of the credit fund was placed with the
National Bank of Kenya (NBK) as a guarantee-cum-risk fund, and it was
agreed that the NBK would provide farmers with loans for up to 85 percent
of the funds.

Credit administration was largely left to project staff and farmer
groups which subsequently formed an apex organization to handle it. These
developments led to exceptionally good recoveries as farmers were
themselves involved in administration while the bank only rubber-stamped
loans submitted for approval and collected the funds. As a result, the
bank's involvement in the project did not affect its own lending policy
toward small farmers.

The project was based on the concept of the formation of groups
and extension of credit with joint-and-several liability. Savings were
encouraged by depositing excess funds from loans into group members'
accounts. Loans were unsecured. Approving them was the responsibility
of project staff who forwarded applications to the bank. The latter
disbursed the loans in cash or kind through direct payment to suppliers or
groups. Supervision was well coordinated with technical support provided
by the NORAD volunteer, rather than the MOA. Marketing was through the
National Cereals Produce and Marketing Board. At times farmers also sold
their produce direct and repaid loans to the group promoters. The latter
also played an active role in preparing loan applications, forwarding them
to the bank and, together with the associate experts, arranging for input
supplies.







- 18 -


The farmers came to rely heavily on project staff who assisted in
all matters related to credit. The staff thus became intermediaries
between the bank and the farmers.

Conclusion

Agricultural credit in Kenya has proved to be a difficult issue.
Government-initiated schemes have shown institutional weaknesses and led to
breakdown of credit discipline. Centralized procedures and weak
institutions have contributed to problems in credit administration.

3.2 MALAWI

3.2.1 Main financial institutions

The main financial institutions providing credit to commercial
farmers are the Commercial Bank of Malawi and the National Bank of Malawi.
They lend primarily to tobacco estates. In recent years agricultural loans
have represented between 35 and 50 percent of their total lending. The
Investment and Development Bank of Malawi Limited gives high priority to
entrepreneurs, particularly in the export sector.

Credit to smallholders is provided by both institutional and
non-institutional sources. Most institutional smallholders' credit is
available from Government and quasi-Government sources such as (1) the
National Rural Development Programme (NRDP); (2) the Government Loans
Board (GLB); (3) the United Nations Capital Development Fund; (4) the
Settlement Schemes Fund (SSF) and (5) Unesco funds for lending to women.
The Ministry of Agriculture is solely responsible for administering these
funds. Smallholders' contact with the banking system is mainly through
the Post Office Savings Bank. In addition, there is a nominal cooperative
movement comprising 58 primary societies whose activities are coordinated
by an apex body, the Malawi Union of Credit Cooperatives. The cooperative
movement has mobilized some MKw.1 million in savings. 1/ As with
cooperatives elsewhere, the movement has faced difficulties in loan
recoveries and administration of the societies. Under a USAID programme
efforts are being made to revive the cooperatives.

Informal credit, as in East Africa in general, appears to be
confined to borrowing from friends, relatives or shopkeepers.
Money-lending is seldom practised as a profession. Most informal credit
is interest-free. Although the terms are easy, arrangements flexible and
loan procedures simple, the source of credit is short-term and insufficient
for use in productive.enterprises. Women are believed to have access to
informal sources of credit mostly from relatives but with the knowledge of
their husbands and the spouse of the lender, should the latter be a male.

In contrast to other countries in the study, Malawi has developed
an effective programme for supporting women in agricultural production.
Efforts to involve them in the credit scheme began in 1981


1/ MKw. 1.98 = US$1 (rate as of January 1987)






- 19 -


when the women's programme was reorientated from the traditional concept of
home economics and nutrition toward agricultural production.

Partly because of a shortage of resources, both financial and
human, (not enough farm home assistants or female extension staff) the
largely male-dominated extension service was instructed to incorporate
women in farmers' clubs or groups. In 1985/86, of the 207 996 borrowers
in the MOA-administered schemes 19.4 percent were women (up from 17 percent
in 1983/84), either in mixed groups or in exclusively women's groups. Of
the 1 002 groups formed, only 193 have received credit because of shortage
of funds. Although the 19.4 percent coverage is far short of the 30
percent female-headed households in the country and still disproportionate
to the effort of women in agricultural production, nevertheless a start
has been made. A Unesco project in Kasungu has provided credit to some
162 groups comprising 4 589 members, with 100 percent recovery in 1984/85
and 95 percent recovery in 1985/86. The latter percentage reflects the
situation only up to October 1986 and it was anticipated that additional
recoveries would subsequently be made.

In recognition of women's role and also because of their superior
repayment record the MOA intended to revise its operational manual to
extend credit to women more widely. The essential changes to be
incorporated are as follows:

(a) Women can independently take seasonal credit through clubs or
groups, and they may be:

heads of households;
wives of husbands who are away or are involved in off-farm
business; and
wives in polygamous marriages;

(b) Women who wish to take credit should, whenever possible, try to
join existing credit organizations in their area. This means
that:

women can be accepted into male clubs/groups;
in mixed clubs/groups, women might prefer to form a sub-club/
group of their own but still be associated with the parent
body;
in some circumstances, women might prefer to set up separate
new groups but this should be with the consent and support of
the community and existing clubs/groups;

(c) Women borrowers must be fully involved in credit and agricultural
training including demonstrations;

(d) Women can take medium-term loans for farm carts, implements, dairy
animals, stall feeders, etc.

Despite these policy changes, social constraints remain. According
to the Women's Programme Officers of the MOA, major problems in expansion
of credit to women were the following:

(i) Shortage of funds (the reason why of the 1 002 exclusively women's
groups only 193 had received credit);






- 20 -


(ii) Lack of staff mobility. There were 250 FHAs supporting 1 000
groups. Even with this staff and with present programming these
FHAs could deal with double the number of groups, based on the
present schedules of weekly visits, if it were not for lack of
mobility;

(iii) Persistent resistance to granting credit to women.

3.2.2 The MOA's credit scheme

The credit scheme is well operated. Recoveries are in the range
of 90-95 percent and the schemes for men and women are organized in the
same way. A brief description of the organization, policies and
procedures of the scheme is given below.

3.2.2.1 Organization of the scheme

The MOA gives support to projects through eight agricultural
development division (ADDs), each controlling some five rural development
projects (RDPs). The latter are divided into extension planning areas
(EPA) where extension services are coordinated.

The credit section falls under the Department of Agricultural
Development and is the responsibility of a principal agricultural credit
officer (PACO) who reports to the Controller of Agricultural Services
(CAS). The PACO is responsible for implementation of the policies laid
down by the MOA's National Credit Committee. The latter, which is chaired
by the CAS, establishes credit policy and gives guidelines for procedures
and documentation. Further, it coordinates the disbursement of inputs by
maintaining close liaison with the Agricultural Development and Marketing
Corporation (ADMARC), a parastatal body responsible for supplying inputs
and purchasing farmers' produce.

Credit operations are substantially decentralized to the ADD
level. Here operations are directly under the senior agricultural
extension officer who is supported by an agricultural credit officer
(responsible for credit operations in the ADD, consolidation of ADD credit
accounts, training and approval of medium-term loans). Also reporting to
the agricultural credit officer are the credit supervisors at the project
level. The credit supervisors take policy directives from the
agricultural credit officers but are administratively responsible to the
project officers. Credit accounts at the rural development project level
are maintained by a credit accounts assistant. The project-level staff
are supported by a credit assistant at the EPA level.

Credit assistants, credit supervisors and above have an
educational background similar to the extension service. Credit
assistants complete a two-year course in agriculture while credit officers'
educational background is similar to that of a field officer in the
extension service, that is, a three-year diploma course. The staff
recruited for credit are given an additional two-week course in the ADDs
with further on-the-job training and refresher courses when necessary.

Short-term loans are given only through farmers' groups/clubs
which have proved to be successful. In Malawi success is largely due to
local peer pressure to repay loans. In group lending, the group is







- 21 -


jointly responsible for repayment. If there is even partial default,
credit to the whole group is suspended. This procedure is rigidly adhered
to. The MOA has encouraged formation of clubs. A group carries a
connotation of being formed solely for the purpose of borrowing funds. In
clubs, on the other hand, members are encouraged to take up other
activities such as group plots, group savings, provision of labour on sick
members' plots, etc. The groups/clubs have elected officials including a
chairman, vice-chairman, secretary, vice-secretary, and treasurer. To be
registered as a group, members have to be endorsed by a village head or
local leaders as being bona fide farmers with good standing in the
community.

3.2.2.2 Lending policies

Seasonal credit given to groups only is provided on the basis of
packages for 0.4 ha recommended by the extension service. Seasonal inputs
are distributed by ADMARC. Loans are for two years. Medium-term credit
has been provided for work oxen, livestock, ox-drawn carts and implements.
The loan period averages four years with repayments commencing at the end
of the first year. Implements are supplied by the ADDs, often from
ADMARC, and livestock by the Department of Animal Health and Industry
(DAHI). Loans are secured by financed equipment and assets of the
borrower. These loans are given on an individual basis, with an interest
rate of 10 percent per annum. Up to 100 percent of the cost of equipment
is financed.

3.2.2.3 Lending procedures

Loan applications are prepared by extension staff with club
leaders and forwarded to credit assistants. The lending procedures are well
implemented. Loans are processed and approved on time, an important
consideration for seasonal loans as farmers must receive their inputs prior
to planting.

Loan approval is suitably decentralized. Regardless of the size
of the loan, all seasonal loans are approved by a project loans committee
which is chaired by a project officer, credit supervisor, field officers
and two field staff. All medium-term loans are forwarded to the ADD,
where they are approved by the ADD's loan committee.

Loan appraisal Loan packages are reviewed for profitability each
year and are approved by the MOA. Thus seasonal loans do not need any
significant appraisal. Only the individual farmers' holdings and the
groups' repayment records need to be verified. For medium-term loans, the
credit assistants make an evaluation of the farmers' disposable assets,
income base and type of collateral.

Loan Disbursements All loans are disbursed in kind. Seasonal
inputs and farm implements are provided through the nearest ADMARC markets
or from companies in the presence of a credit assistant or someone from the
project.

Loan supervision Although the loans are disbursed in one phase,
they are carefully supervised, with the extension agent making fortnightly
visits to the farmers' club/group.







- 22 -


Loan collection When the marketing season opens, group leaders
are expected to repay the loans after sale of the produce. The leaders
repay the credit assistant who issues a receipt. A copy is sent to the
project as proof of repayment. Collection procedures on defaulted loans,
however, are not carefully defined, much being left to the initiative of
the local ADD. In the case of serious default, lists of the defaulting
farmers are sent to the local leaders. As a last resort, legal action is
initiated through local courts. 1/

Lending operations

Seasonal credit Seasonal credit to smallholders has in current
terms increased fourfold, from MKw.5.8 million to MKw.20.5 million during
the 1980/81 1985/86 period, benefiting some 210 000 farmers, 19 percent
of whom were women. Since inception in 1978 through March 1986, total
disbursements for medium-term loans amounted to only MKw.4 million,
benefiting about 9 800 farmers.

Loan recoveries Recovery performance of seasonal credit has been
excellent. From 1968/69 to 1984/85 the total cumulative amount of
seasonal credit was MKw.63.4 million of which MKw.61.8 million (97.4
percent) was recovered. Recovery of term-loans was less impressive, and
although exact data are not available, it is estimated at about 60 percent.
Poor recovery of term-loans is primarily the result of deficiencies in the
system rather than inability or unwillingness of borrowers to repay, and
measures are under way to improve accounting and monitoring procedures.

The recovery performance of women's clubs has been even more
impressive. Recovery statistics are not completely monitored; the data
were compiled by the mission and therefore analysis should be viewed as
tentative. In 1984/85 102 women's clubs repaid 99.4 percent compared with
total system-wide recoveries of 83.6 percent. In the Kasungu ADD under
the Unesco scheme comparative statistics are as follows:

1984/85 1985/86

Women's groups 100% 95%
Kasungu ADD 91% 89%

From this tentative analysis it could be concluded that women are
better repayers. The observations of credit staff support this
conclusion.

3.2.2.5 Costs of credit systems

The administrative costs of the credit system at all levels -
EPA-RDP-ADD-MOA were estimated at MKw.1.4 million, equivalent to about
5-6 percent of the volume of credit in 1985/86. This estimate includes
salaries and allowances of all credit and accounting staff, and other
recurrent expenditures.



1/ Recoveries below MKw.l 000 can be enforced through local courts.







- 23 -


The scheme is very successful and replicable. Administrative
costs of 6 percent compared with interest rates of 10 percent generate a
positive cash flow. The success of MOA's credit can be attributed to the
following features:

(i) Decentralized procedures and timely loan approvals;

(ii) Viability of packages;

(iii) Close coordination between credit and extension;

(iv) Regular supervision by extension staff;

(v) Attempts to supply inputs on time was hampered because of
external factors. ADMARC also buys farmers' produce in
cash, thus input supply and marketing are coordinated.
More recently, however, ADMARC failed to purchase all the
produce and in-season recoveries in 1984-85 slipped to 84
percent and 75 percent;

(vi) Efficient loan administration and bookkeeping;

(vii) Political will of the Malawi Congress Party and concerted
action with the MOA to recover loans in the event of default
by borrowers.

Conclusion

Malawi's experience in increasing the participation of women is
an example of how policy measures more than development of separate
institutions for women would contribute more rapidly, and even more
effectively, to improving the services provided for women.

3.3 SIERRA LEONE

3.3.1 Credit systems

The formal credit system in Sierra Leone comprises the Bank of
Sierra Leone (BOSL), five commercial banks (CBs), a recently restructured
National Development Bank and one rural bank (RB). Historically the CBs
have provided very limited support for the agricultural sector, and
although little evidence exists, it is suspected even less for women in
general and rural women in particular. Since 1977, with minor exceptions,
less than 3 percent of the total CB credit has been to finance development
of the rural sector. Most CB credit has been short-term, leaving an even
wider resource gap in provision of term credit. As a consequence the
institutional vacuum in support of the agricultural sector has been filled
through IADPs which provided credit and input supplies through their
Commercial Service Departments (CSDs).

In all, seven IADPs were established covering about 85 percent of
the country. Of the seven, one the Eastern financed by the World
Bank, established an independent farmers' finance company (FFC) to
undertake the functions of the CSDs. Of the remaining six, one, the







- 24 -


German-financed Bo-Pajehun project, did not include a credit component,
while the other five, Northern, Koinadugu, Magbosi, Moyamba and North
Western, implemented credit and input supply programmes.

As the IADPs are to be phased out, the Bank of Sierra Leone is
developing a rural banking scheme. The first rural bank, the Yoni Rural
Bank, was launched in March 1985.

None of the IADPs with the exception of Magbosi had a specific
women's programmes component. The Magbosi IADP formed women's groups for
promoting income-generating activities. Although the women's programme
was initiated successfully (five groups with 200 members were started), no
specific credit component was developed. The low availability of credit to
women in Sierra Leone fewer than 7 percent are believed to have received
it 1/ is surprising, particularly as the women, unlike their counterparts
in other countries in the study, have considerable independence. Although
customs vary in different areas, by and large the women have access to land
and operate in separate economic spheres from men. Moreover, among such
groups as the Sherbro, Kaim, Vai, Gallinas and Mendo, women as well as men
control labour and capital and can acquire religious and political power.
2/

Clearly a resource gap exists in providing services for women.
Besides the institutional arrangements already mentioned, two
FAO-administered projects, one of them specifically aimed at women, have
attempted to provide credit:

(a) The Peoples' Participation in Rural Development (PPP)
through the Promotion of Self-Help Organizations, which is
financed by the Government of Netherlands through FAO's
Government Trust Fund Programme. The project operated from
April 1982 to July 1986 in the Pujehun district;

(b) The Integrated Agricultural Project for Women through
Community Action. The project, financed by the Government
of Norway, is based in Koinadugu district in the north.

Before reviewing the major credit schemes in the country it would
be appropriate to review briefly the input supply, marketing and prevalent
research components.

Input supply Rice seeds are provided by the German-financed Seed
Multiplication Project. On average, between 1979 and 1985 there
were shortfalls of 20-30 percent in national requirements. Aside
from bilateral donor-funded projects, notably the EEC-financed
Koinadugu and North Western IADPs, where fertilizers are not
brought in under competitive international bidding, imports of
fertilizers have usually been delayed by the government's heavily
centralized procurement procedures.


1/ IFAD Rural women in agricultural investment projects, 1977 to
1984.
2/ Women's work in rural cash food systems in Tombo and Glouster
development projects in Sierra Leone.






- 25 -


Research has been a major problem and in spite of the
USAID-financed Adaptive Crop Research and Extension Project no
specific packages of technology have been developed for rice.
Although new high-yielding varieties for cassava and sweet
potatoes have been introduced, cassava has proved unpopular.
Yields of most crops remain low.

Extension services generally need to be further improved despite
considerable donor-funded support of the IADPs.

Marketing of rice and other food crops is in private hands, except
for export crops, notably coffee and cocoa, which are mostly
produced in the eastern region and for which the Government-owned
Sierra Leone Produce Marketing Board has the monopoly. There are
no linkages between marketing and credit.

From the above description it will be apparent that the
institutional framework for credit operations is not particularly strong in
Sierra Leone. Nevertheless some successes have been achieved. A brief
description of the credit operations of the rural bank, IADPs and PPP are
given in the ensuing sections.

3.3.2 Credit operations of the Yoni Rural Bank (YRB)

The YRB was established in March 1985. The rationale behind
establishing rural banks is to involve local people in ownership of
institutions giving them pride of ownership and involvement in the
management of the institution. In the 18 months up to the time of this
study, the YRB operated reasonably successfully, if not completely
smoothly. It has a staff of 12 including suitably qualified accounting
and bookkeeping staff. The staff get low salaries and they are not paid
enough to cover travel expenses. Thus loan supervision is inadequate.
Operational problems in accounting and bookkeeping are being addressed by
BOSL audit teams. Despite these problems, in addition to financing the
farmers the YRB has assisted them by arranging for tractor hire services
and procuring fertilizers. As a consequence, farmer response has been
substantial. Some sceptics who had adopted a "wait-and-see" attitude now
plan to buy shares in the institution.

The YRB has successfully mobilized significant resources. As of
31 October 1986 total deposits stood at Le 1.9 million, 1/ and with a Le
0.6 million credit line from the BOSL, along with paid up capital of Le 0.2
million (of which Le 0.12 million was held by the BOSL in non-voting
stock), its investable assets stood at Le 2.7 million. Lending has been
low. As a matter of deliberate policy the YRB has not developed an active
lending programme. Rather, emphasis was placed on stabilizing its
operations. This policy is being reviewed. The lending procedures


1/ Le 33 = US$1 (rate on 1.12.86)






- 26 -


summarized below are well thought out and implemented and loan recoveries
have been good, in the range of 85-90 percent. Some 8 percent of the
outstanding loans of Le 0.2 million are overdue, all less than three
months. Since inception, the YRB has shown an expected operating loss of
Le 20 000. This loss does not reflect the hidden subsidies in its
operations (for example, the manager's salary is paid by the BOSL).

3.3.2.1 Lending procedures

Loan approval is through a loans committee comprising local
leaders who are also stockholders, on the premise that they know the
community and would recommend only credit-worthy borrowers. Board members
cannot approve loans to themselves. These must be approved by the BOSL.
There are thus built-in checks and balances in the approval process with
the most critical step, identification of credit-worthy borrowers, being
left to people with knowledge of the community. Loans are approved on
time, an important consideration in seasonal lending.

Loan appraisal is reasonably thorough. Bank staff visit
prospective borrowers to familiarize themselves with their operations and
check their credentials through local contacts prior to recommending them
for approval.

Group borrowing by small farmers is encouraged. By forming
joint-and-several-liability groups, the YRB hopes to lower administration
and supervision costs. It also expects the groups to identify
credit-worthy borrowers in the community. Groups are expected to have
elected leaders, to purchase shares in the YRB and to open a joint savings
account. Regular group savings which would contribute to cohesiveness are
not at present encouraged and groups are too large (some have as many as
112 members) to undertake effective joint-and-several liability.

Loan disbursements are in kind and as far as possible, funds are
released in trenches. In this way loan officers ensure that funds are
used solely for productive purposes and released only when various stages
of operations have been completed. Thus the first tranche for land
preparation is released on approval; the second for seeds and fertilizers
after loan officers have inspected the plots and are satisfied that land
has been suitably prepared; the final one is released at the appropriate
time for harvesting.

Loan supervision Loans are carefully supervised, with loan
officers making periodic visits to the farmers and maintaining contact with
them. In this way they can often spot problems and assist farmers or
suspend further disbursements, as appropriate, should problems arise.

Loan collection So far, few problems have been experienced with
recoveries. General contact, frequent visits, timely advice and
assistance have ensured repayments. Where problems have risen, visits
have been made to the borrowers, the guarantors promptly notified, and
after discussions, debts have been rescheduled. Such close follow-up of
operations and flexibility in lending operations should ensure settlement
of overdue loans without recourse to expensive litigation to enforce
recoveries.






- 27 -


3.3.3 Integrated agricultural development projects (IADPs)

In the absence of any developed infrastructure, rural credit and
input distribution have been provided by the IADPs and the FFC.

IADPs and the FFC have followed identical loan procedures and
policies. Organizationally, operations have been controlled from
headquarters, with field staff at the district level and at farm service
centres; the latter providing storage facilities. Loans have been
granted for short term (rice, groundnuts, maize cultivation) and medium
terms (swamp and tree-crop development). Seasonal loans with less than
one-year maturity finance only inputs, excluding labour, and are disbursed
in kind.

Contacts with individuals or groups are maintained by the
extension staff who identify borrowers, prepare application forms and after
checking with local authorities forward them to agricultural officers
(AOs). The AOs check the bona fides of the borrowers with their paramount
chiefs before forwarding the applications to credit staff.

Credit staff screen applications prior to disbursements, which are
in kind. Supervision seems inadequate. Unlike Malawi, which operates a
similar decentralized credit scheme through integrated projects, Sierra
Leone has neither coordination at national level nor systematic follow-up
by the Ministry of Agriculture and National Resources (MANR)to ensure
consistent and thorough loan administration. As a consequence recovery
performance has varied between 50 and 100 percent.

In the North West, where recoveries have varied between 99 percent
and 100 percent, the credit scheme was started by an expatriate, who had
earlier worked in Malawi and had thorough experience of developing group
credit schemes. The scheme achieved significantly better recovery rates
because of the following factors:

(a) Groups when financed on joint-and-several-liability basis
received credit when deemed to be cohesive. Unlike Magobi
IADP, where defaulting members were weeded out from groups
while the rest received credit, in the North West when one
member defaulted the whole group was automatically
disqualified from borrowing. Thus local peer pressure was
brought on the defaulters to repay loans;

(b) Loans procedures and obligations of borrowers were carefully
explained;

(c) Procedures and accounts were carefully adhered to.
Systematic administration led to proper follow-up, close
supervision and higher recoveries;

(d) Being EEC-funded, the project imported its own fertilizers,
by-passing the MANR's procurement procedures and so achieving
a timely supply of inputs;






- 28 -


(e) The North West project is located in one of the two major
rice-growing areas where conditions are favourable for
development of this crop. These natural factors, coupled
with the timely supplies of inputs, led to surpluses with
which farmers could repay the loans. Farmers here were more
fortunate than those in other IADPs where packages of
technology proved doubtful even for swamp rice.

Another area in which recoveries were considered good (86-90
percent) was in the east. The Eastern IADP (EIADP) had poor recoveries
before 1980 due, inter alia, to lax administration, including poor
record-keeping, approval of repeat second loans although the first had not
been paid, lack of supervision and misappropriation of loan repayments by
credit staff. Under pressure from the World Bank, however, an expatriate
consultant was appointed to systematize loan administration and this led to
significant improvements in recoveries. In addition, high prices for
coffee and cocoa and strong demand for palm oil, all three major products
of the EIADP, also contributed to increased profitability and loan
repayments by the farmers.

Recovery performance in other IADPs, however, remains erratic.
The major problems are the following:

(i) Lack of proven packages which would improve farmers' income
and hence their ability to repay loans;

(ii) Delays in supplies of inputs;

(iii) Maladministration of credit, including approval of new
loans when previous ones have not been repaid, granting of
fictitious loans, poor record-keeping including inaccurate
recording of loan repayments;

(iv) Lack of proper follow-up and supervision;

(v) Delays in loan approvals;

(vi) (In the Magbosi IADP) forming groups to obtain credit
rather than first establishing group cohesiveness.

Credit administration costs of the IADPs have been high.
Excluding provision for bad debts they have ranged between 14 percent and
20 percent of the average loan portfolio.


3.3.4 The People's Participation in Rural Development 1/

The PPP operated in the Pujehun district around clusters of
villages with a group promoter assigned to each cluster. During the



1/ Not visited by the consultant: the conclusions have been summarized
from evaluation reports.







- 29 -


project period, 1982-86, management was fairly intensive. Some 70 groups
were formed by eight group promoters whose activities were coordinated by
an associate expert and credit supervisor. In the plan of operations it
was envisaged that a guarantee-cum-risk-fund (GCRF) of US$50 000 would be
placed with a financial institution, but apparently negotiations failed and
it was not established. Subsequently funds were allocated to the credit
component of the project and the amount was reduced to US$30 000.

Credit disbursements began in 1984 from the fund direct to the
borrowers. Credit was thus administered by the project staff. Repayments
from first year loans were subsequently placed with Barclays Bank, Pujehun,
and led to the establishment of a revolving fund. Total disbursements in
the first year amounted to Le 11 000 with recoveries of 90 percent. In the
second year the revolving fund was supplemented by funding of ten
cassava-grating machines leading to total disbursements of Le 30 000.
These profitable operations contributed to recoveries of 94 percent.

Judged by recoveries alone the performance of the scheme was good.
Where defaults occurred, particularly in agricultural production loans,
they were largely due to the problems already mentioned arising from lack
of viable packages of technology. Another factor contributing to defaults
arose from a misunderstanding; the farmers believed that some inputs
during the first season had been made available in the form of grants.

Conclusion

Credit facilities in Sierra Leone have not been sufficiently
developed,largely because of lack of a national policy, poor follow-up and
lax credit administration. There have been some successful schemes,
however, notably those of the YRB, NWIADP and the PPP. There have been no
programmes specifically designed for women.

3.4 ZAMBIA

3.4.1 Types of credit institutions

Zambia's financial sector comprises private and public
institutions including specialized agricultural finance companies,
commercial and development banks, insurance companies and cooperatives.
Agricultural credit is provided by a number of sources, the most important
of which are Zambia Cooperation Federation Financial Services Ltd.,
(ZCF-FS), the Agricultural Finance Corporation (AFC), the Zambia
Agricultural Development Bank (ZADB), and commercial banks, among which
Barclays is important. As of 31 December 1984, total outstanding loans to
the agriculture sector amounted to roughly ZKw.500 million. 1/ Of this
amount 80 percent was extended by the commercial banks. The ZCF-FS is the
only credit institution which has adopted lending to small-scale farmers as
its principal aim and which has a field staff network capable of reaching


1/ ZKw. 16 = US$1 (rate on 1.12.1986)







- 30 -


farmers in the more remote parts of the country. The AFC's and ZADB's
operations are being reduced by the Government in favour of a new
institution, the Lima Bank. Both institutions generally directed up to
80 percent of their credit to medium- and large-scale farmers.

Barclays Bank initiated a smallholder loan scheme in 1980/81.
Although it imposed conditions (deposits with the bank) and most of their
credit funds were taken by medium- rather than small-scale farmers, the
scheme is reviewed here to illustrate a good modus operandi.

As in many other countries credit for women has been limited.
Commercial banks extend loans against collateral and women in rural areas
have little collateral to offer. Figures are not available but women's
participation in the cooperative movement is also believed to be limited.
Partly due to lack of awareness, women constitute less than 5 percent of
their membership.l/ Fewer than 5 percent of the AFC's clients were women.
Similarly for other CBs the figures have varied between 2 percent and 10
percent.

As in many parts of East Africa, informal credit is limited to
borrowing from friends, relatives or shopkeepers. Women are known to have
access to this kind of credit although they have to exercise great
discretion in tapping it. Both the borrower's husband and the wife of the
lender, should the latter be a male, have to be aware of the loan.

Formal credit for women in Zambia has been provided largely by
selected projects. These include the SIDA-financed Women's Participation
in Rural Development (WPRD) and the partially FAO-administered Lima
National Fertilizer Programme (NLFP) (two-thirds of the beneficiaries are
women although both men and women are encouraged without bias). The
experiences of these projects along with the cooperative credit scheme, all
three of which are administered by the ZCF-FS, are reviewed in the ensuing
sections. For purposes of comparison the Barclays Bank credit scheme is
also reviewed.

Support services Zambia's institutions are not particularly
efficient. The National Marketing Board (NAMBOARD) is responsible for
input distribution (through cooperative unions) and for purchase of cereal
crops. Input supplies have been late. As in Kenya, payments from the
board to the farmers are also delayed. The extension service has not
proved to be particularly strong.

3.4.2 Zambia Cooperative Federation-Financial Services Ltd (ZCF-FS)

The ZCF-FS was established as a subsidiary of the Zambia
Cooperative Federation (ZCF) which was set up in 1973 to promote
cooperatives. Initially the ZCF directly undertook a number of functions
related to the cooperative movement, including credit. Subsequently it


1/ Constantina Rothschild: The policy implications of the roles of women
in agriculture in Zambia.






- 31 -


was realized that operating credit services along with its other functions
as a department within the organization did not provide sufficient
flexibility and independence of operation. The ZCF-FS was thus organized
as an independent subsidiary in 1983.

The ZCF-FS has successfully operated a smallholder credit scheme,
the Cooperative Credit Scheme (CCS). Largely because of carefully defined
and judiciously applied procedures, it has been able to improve its
recovery performance from 50-plus percent in 1978/79 to about 90 percent by
1985/86.

Organizationally the ZCF-FS has developed a three-tier
cooperative structure. As an apex financial-services body, it channels
credit through the unions which in turn pass it on through the societies.
Although the ZCF-FS is a separate body its staff closely supervise and
often pay for travel and operating costs of the credit sections of the
unions and the societies. Some salient features of its organizational
aspects are (1) the staff are well trained at all three levels; (2) duties
and responsibilities of all the credit staff are clearly defined.
Operational manuals give details of the procedures to be followed and the
management ensures that they are adhered to.

The CCS lending procedure is as follows: loans are given for one
year for crops purchased by NAMBOARD. Recoveries are enforced through a
stop-order system. Although a borrower cannot receive more than two-thirds
of the average value of the crops marketed through the societies, loans are
adequate. Loans are given in packages and borrowers receive them for
cultivating between 1/4 and 8 ha. Credit is secured by two guarantors
known to the society and borrowers must have paid their membership dues.
Borrowers are ineligible for further loans if they have not repaid those of
the previous season in full. There are no exceptions to this rule, even
for borrowers affected by drought. Borrowers are instructed in the
obligations of credit and must take a one-day course before they are
eligible. This strong emphasis on training in the obligations of credit
and borrowers' responsibilities as members of society is a unique feature
of the scheme.

For a society to be eligible it must meet the following
conditions:

(a) Management and record-keeping must be sound. Accounts must
be audited each year. Union dues must have been paid;

(b) The board should have taken a course on the CCS;

(c) The society must have an overall repayment record of 93
percent;

(d) It must have trained staff, and must follow up on overdue
loans.

All unions can receive credit from the ZCF-FS, but to be eligible
they should have a well-managed savings and credit department and must have
repaid previous loans.







- 32 -


By insisting on rigid adherence to the guidelines the ZCF-FS has
been able to train and develop effective intermediaries that interact with
individual borrowers on its behalf. It has achieved a good repayment
record, reinforced by peer pressure exerted through society members as the
whole society becomes ineligible for further borrowing if recovery rates
fall below a certain minimum.

Lending procedures are equally well thought out and carefully
defined. The salient features are summarized below:

(a) Funding is made available only to credit-worthy borrowers
known to the societies. Loans, which are adequate provided
the borrower sells the produce through the cooperatives,
cannot exceed two-thirds of the average of three years' sales
by the borrower to the union;

(b) Loan packages are technically sound and viable. They are
worked out in conjunction with the extension staff who with
the credit staff also review applications;

(c) Loan approval procedures are thorough, if tedious. Rigid
adherence to a fixed time schedule does, however, ensure
timely disbursements (see chart 1). Farmers' applications
are submitted to the society, which after joint examination
with the agricultural assistant either accepts or rejects
them, then forwards them to the unions. The unions
re-examine all applications to ensure that loans are granted
only to individuals with 100 percent repayment records, and
that a borrower does not receive more than one loan. Once
applications are approved the unions apply for the loans to
the ZCF-FS. The latter, subject to compliance by the unions
to its conditions, disburses payments to them. Prior to
releasing the funds, the unions check the repayment records
of the societies. They then prepare individual local
purchase orders (LPOs) and forward them en masse to the
societies for further distribution to members.

Loan disbursements are in kind. Borrowers use the LPOs to
purchase inputs from the local union markets. A unique feature of the
system is that LPOs are valid only up to certain dates. Thus, if for some
reason the inputs are not delivered on time, the loan is cancelled. This
has the effect of restricting farmers from obtaining inputs when they
become available late as this is not in their interest. In a number of
other schemes loans which have once been approved continue to be disbursed
even late in the season, putting the farmers in debt without giving them
the benefit of increased production.

Loan supervision Supervision is by credit supervisors, whose job
is well defined, and members of the board of the society, who are in close
contact with the borrowers. Credit staff of the unions and credit officers
of the ZCF-FS also make systematic and programmed visits to the unions,
societies and borrowers. These built-in checks ensure that field staff
are doing their job.

Loan collections Stop-orders are used to collect loans. Those
which are overdue are systematically followed up. All societies are
required to collect overdue loans or, after a suitable period, to initiate
legal action.






- 33 -


Through well thought-out procedures and assiduous follow-up the
ZCF-FS has built up a good repayment record. Its total disbursements in
1984/85 and the recovery performance by some selected schemes are
summarized in Table 4.

Table 4

NUMBER OF BORROWERS, DISBURSEMENTS AND RECOVERIES IN SOME
ZAMBIAN CREDIT SCHEMES

Borrowers Disbursement % recovery
(ZKw. 000)

CCS 11 005 6 005 87
NLFP 266 130 93
WPRD 773 41 73
PAP 318 45 57

As can be seen from the table there are significant differences in
the results of the various schemes. In part these differences can be
accounted for by drought or other natural factors. Some problems have been
encountered in their administration, however. A brief description of the
schemes is given below.

3.4.2.1 National Lima Fertilizer Programme

The NLFP project was established to increase production at
small-scale farmer level by stepping up demonstrations, training
agriculture staff in fertilizer use, and providing credit. In 1983 the
project made ZKw.350 000 available to administer the credit component.

Women constitute 66 percent of the participants. Organizationally,
the project is attached to the Ministry of Agriculture and Water
Development (MAWD) and project staff are located at the ministry's
headquarters in Lusaka. The project is implemented through MAWD provincial
and district staff who organize demonstrations and groups. Credit is
provided by the ZCF-FS. An expatriate credit advisor monitors performance,
acts as a facilitator and generally promotes coordination between the
extension and credit staff.

Borrowers, although organized in groups, apply for loans as
individuals through the societies using ZCF-FS procedures. Peer pressure
is brought to bear on borrowers, as groups who must repay 100 percent to
qualify for another loan. This has proved so successful that the ZCF-FS
reorganized the larger societies into small sub-groups. Moreover, because
groups were organized in clusters around demonstration plots, technical
advice was easily available. Joint supervision by extension staff and
ZCF-FS reinforced by project staff has contributed to higher recoveries
than in the CCS.







- 34 -


3.4.2.2 Women's Programme in Rural Development

The WPRD, a SIDA-financed project, was developed to assist women's
groups through training and credit. The project, implemented by the MAWD,
was to be implemented in areas where integrated rural development
programmes were being initiated. The ZCF-FS was to provide credit. At
the national level the project was to be implemented by the Women
Development Office. At the field level district agricultural officers
(DAOs) in conjunction with district coordinators under the district
steering committees comprising staff from the Ministries of Social
Development, Health and other relevant bodies were responsible for project
implementation. The extension staff were mobile, with each field extension
officer supervising two groups. The groups selected for the project were
pre-formed and had, in a number of instances, undertaken activities.other
than agricultural production. Most groups became eligible for credit in
the first year of operations. Savings were not encouraged.

Although these groups proved stable, the procedure for formation
was nevertheless erroneous. In fact stability came from membership of the
groups rather than from the procedures that were followed in their
formation.

Flaws developed in the scheme largely because groups did not
relate to the societies but dealt with unions in their own right as groups.
The project design thus made changes from the ZCF-FS's normal operating
procedures. The duties and responsibilities of the unions were not
carefully defined, creating problems in loan administration. In deviating
from normal procedures the union was supposed to undertake the following
responsibilities:

(a) Ensuring that ZCF regulations were followed;

(b) Ensuring that application forms were available from the DAO's
office for further distribution to women's groups;

(c) Approving loans, processing LPOs and registering stop-orders;

(d) Sending LPOs to the groups.

The DAOs were supposed to do the following:

distribute forms to women;
process applications to unions;
distribute LPOs, when it was not possible for unions to do
so;
conduct training in collaboration with union staff;
collect loan repayments in cash where the stop-order system
did not work.

Because the responsibilities between unions and DAOs were not
exactly stated, the unions did not forward the LPOs to the DAOs. As a
result, the project staff were considerably involved in credit
administration. The extension staff were involved in cash collections of
loans and the problem of pilferage arose.






- 35 -


With hindsight it might have been more appropriate to make the
groups members of societies, so avoiding problems of developing new
procedures. An important lesson to be learnt from this project is that
when systems work, as in the case of the ZCF-FS, projects should not
attempt to change them. Procedures should be altered only when necessary.
The NLFP scheme worked better because it complied with the ZCF's
procedures.

Perhaps the designers of the project wanted to form separate
groups for women to ensure that they had a say in their affairs, and need
not be daunted by the possible awkwardness of dealing with male members of
the societies.

3.4.3 The Barclays Bank scheme

Although directed mostly toward medium-scale farmers, the Barclays
Bank scheme is here reviewed to illustrate how a well-run scheme is
operated. It provides unsecured seasonal loans which cover cost of seeds,
fertilizers and cash components for labour and land preparation. Crops
financed are maize, sunflower and cotton. Loans are given for one year
and carry the prevailing interest rate in the country, 31 percent per
annum. Additional charges totalling some 3 percent include commitment
fees, ledger charges and insurance. The scheme has expanded from lending
ZKw.2 million in 1980 to 965 farmers to ZKw.14 million in 1985 to 1 700
borrowers. Only 50 of these were women.

The scheme is administered by two staff at headquarters. Branch
managers coordinate the activities of some 20 field supervisors who have
degrees in agriculture, are mobile, and are paid about three times the
salaries of their counterparts at the ZFC. Because the staff are well
paid, they are motivated. Barclays feels that one supervisor is capable
of dealing with about 150 farmers. The supervisors are expected to
maintain individual contact with farmers. After discussions with local
leaders, DAOs and the unions, they identify the credit-worthy farmers.
The farming practices of would-be borrowers.are carefully observed and only
bona fide farmers are given loans. This strong emphasis on selection of
credit-worthy borrowers has considerably contributed to the success of the
scheme.

Loan packages are reviewed each year. Care is taken to ensure
that farmers are adequately funded. Up to 100 percent of the costs are
financed.

The loan approvals are suitably decentralized. Branch managers
approve loans which are given in kind for seeds or fertilizer and in cash
for land preparation and labour. Loans are carefully supervised. As in
the YRB scheme in Sierra Leone they are released in trenches. Thus
farmers receive the second instalment for seed and basic dressing only
after the supervisor is satisfied that the land has been well prepared.
Similarly fertilizers for top dressing are disbursed only after the
supervisor is satisfied that the land has been weeded and the crop is
satisfactory. The three trips farmers have to make to collect their loans
in stages increase their transaction costs. Because of this Barclays does
not finance farmers with holdings below 4 ha.






- 36 -


Barclays' administrative techniques have resulted in 90-95 percent
recoveries. A rough calculation suggests that their costs are 7 percent.
In addition, Barclays allow a 4 percent provision for loan loss; so in
spite of higher salaries, the bank operates the scheme with a cost of 10-11
percent.

Conclusion

Zambia has some well-developed schemes operated by the ZCF-FS and
Barclays. As the former runs a sound credit scheme, it would be
appropriate, as demonstrated by comparison of the WPRD and NLFP schemes,
for other credit schemes operated by the ZCF-FS to follow existing
procedures rather than to introduce modifications.

3.5 ZIMBABWE

For historical reasons, the country is broadly classified into two
areas: (1) the commercial areas with fertile lands generally owned and
operated by colonial settlers, which have established infrastructure, both
road and rail, and are serviced by input supply companies; (2) the
communal areas (CAs), where the majority of the Zimbabwean population
lives, which are generally poorly serviced and often beset by management
and financial problems. Most CA farmers also live in marginal areas
characterized by poor soils, further affected by erosion and unreliable
rainfall.

3.5.1 Credit institutions

Zimbabwe has a well-developed and regulated financial sector
comprising the reserve bank, commercial banks, merchant banks, finance
houses, a Post Office Savings Bank and specialized lending institutions
such as the Agricultural Finance Corporation (AFC), a parastatal
organization which was established to support agricultural lending. In
addition, in 1984 the Community Development Fund (CDF) was established
under the purview of the Ministry of Community Development and Womens'
Affairs (MCDWA). A minor part of its financing is directed toward
agriculture.

In the informal financial markets in East Africa moneylenders are
generally rare. Most informal borrowing is from relatives, friends or
shopkeepers. There are three major sources of agricultural credit,
commercial banks, the AFC and private companies, such as the Farmers'
Cooperative Company whose members are mostly commercial farmers. Because
of the land tenure system, commercial farmers with freehold land and clear
title are eligible for commercial bank credit. In the CAs where land is
communally held and administered in trust, formal credit has been provided
primarily by the AFC, mostly since Independence in 1980. Private
organizations, fertilizer companies and traders also provide limited
credit.

The percentage of loans to women farmers is not known but it is
widely considered to be insignificant in proportion to their contribution
to agricultural production. This shortage is generally not compensated
for by their access to informal credit. If borrowing becomes necessary,
women have to rely on relatives and loans must be with the knowledge of
their husband and the spouse of the lender (should the latter be a male) to
avoid suspicion.






- 37 -


Although informal lending arrangements are flexible and easy to
obtain and reschedule, the sums are seldom big enough to undertake
productive ventures. Lack of credit and banking facilities in rural areas
have, however, led to the formation of successful informal savings clubs.

3.5.2 Savings clubs /

Cash groups known as 'rotating savings credit associations'
(ROSCA) are another form of self-help group in which members pool their
individual savings for bulk purchases. Such societies are fairly common,
particularly in urban areas, both in Zimbabwe and throughout Africa.
Participants make regular contributions to a fund which is given in turn to
one member each time the group meets. Members, men or women, use the
savings and loan system as a means of purchasing durable household goods.

The most prominent and widespread development of informal savings
arrangements has been the establishment of savings clubs for women. The
Savings and Development Movement (SDM) spread rapidly after the first club
was founded in 1963 but experienced a major setback during the war. It
gained momentum once more after Independence and about 5 500 clubs with an
approximate membership of 140 000 were recorded in 1985.

Savings clubs operate at the village level and are flexible with
regard to savers' needs and preferences. The procedures are simple and
easily understandable even for illiterates because they are based on a
stamp system introduced by the SDM. Membership is open to everybody.
Savings are on an individual basis and there is no real group control on
deposits and withdrawals nor on the use of funds accumulated by the
individuals. Savings are usually to purchase agricultural inputs, but the
amounts saved are often too small to be effective. The main benefit is the
self-imposed discipline through contractual savings, and members are
encouraged to accumulate rather than to withdraw, which has led to net
surpluses over the years.

Some farmer groups have collective savings which the whole group
decides how to use. The members of the group come together to pool labour
resources for collective purchasing of inputs as well as to have easy
access to extension services. Many groups operate in communal lands with
an average membership of 25-30, the majority being women. Many of them
are de facto family heads as their husbands are migrant workers. Members
of farmer groups can also belong to savings clubs and so have individual
savings.

Although it may be tempting to link formal credit to informal
organizations, particularly since some clubs undertake income-generating
activities, few, if any, clubs make loans. The founders of the movement
strongly discouraged borrowing. It has been suggested that a movement of
this kind could provide the basis for separate women's banks, but the
development of new institutions takes time and resources. Women would not
necessarily go to a women's bank if it were not conveniently located. Nor
is success guaranteed. The use of existing resources such as the AFC, as
in Malawi, might be more appropriate.

3.5.3 Role of non-governmental organizations (NGOs)

Over the years several private agencies including religious
organizations started their own loan and development schemes for CA
farmers. To exploit the market potential, suppliers and manufacturers






- 38 -


(particularly fertilizer companies) also started to extend credit to
small-scale farmers in the late nineteen seventies. In almost all cases
they suffered heavy losses, primarily because of lack of management, and
this led to severe curtailment or abandonment of credit facilities. Among
NGOs the experiences of CADEC (formerly the CSDO, Mission for Social
Services and Development, a Catholic organization based in Chinhoyi) and
Silveira House are worth noting. The CSDO initiated two schemes. In
1980 it extended credit to groups of farmers and had a 33 percent recovery
rate. This poor result was because of the high mobility of farmers at the
time of Independence; it appears that most people simply moved away. In
1981, better organized, the CSDO extended credit to some 25 groups of
farmers, each comprising 10 members, in four districts. Loans were
supervised and technical advice was provided. This time recoveries
reached 75 percent and farmers are still repaying their loans. The CSDO
subsequently handed these groups over to Windmill, a fertilizer company.

Silveira House (a Catholic association on the outskirts of Harare)
which started a "package deal" development programme in 1968 to familiarize
CA farmers with the benefits of agricultural inputs, claims success through
providing groups with awareness and motivation courses, extension services,
and loans to cultivate half-hectare plots.

According to Silveira House, there were four factors that
contributed to the success of their groups:

(a) Group cohesion was established. No group was given credit
unless members had successfully worked together for one or
two seasons;

(b) Loan packages were carefully costed. As the beneficiaries
were mostly in marginal areas, they were financed for up to
50 percent of the package cost only, a condition that made
repayment less difficult and eased the burden of debt in
periods of poor rainfall (such areas face drought two years
in every five);

(c) Proper training was given in group dynamics, the principles
of cooperation and cooperatives and leadership;

(d) Constant contact was maintained with the communities,
ensuring advice, supervision and most importantly, trust
between the project and the beneficiaries.

Faced subsequently with a shortage of funds, Silveira House handed
these groups to the AFC, which initially financed them. Now, however, of
the initial 512 groups only 36 survive. A number of problems faced these
groups: the AFC financed 100 percent of the loan packages which farmers in
drought-prone marginal areas found difficult to repay; debts could not be
rescheduled; the AFC did not maintain close contact with the farmers.
Most groups broke up and today the AFC faces arrears of up to Z$l million
from the same farmers that Silveira House claims repaid almost 100 percent
of their loans. With hindsight it would have been better for the AFC to
finance Silveira House which could have acted as intermediary.

3.5.4 Formal credit

FAO administers three Trust Fund projects. A brief summary of the
of AFC, CDF and the Trust Fund operations is given below.







- 39 -


On paper the AFC credit scheme should have been ideal. It has been
supported by timely input supply, good extension service and marketing
boards which generally operated well and through which the AFC operates a
stop-order system to enforce loan recoveries; but for a number of reasons,
both conceptual and operational, the AFC has run into difficulties. It
has expanded its operations rapidly. The total number of loans processed
has increased from 4 000 to over 70 000 in five years. Most of this
increase has been to small farmers and since the AFC prefers to deal with
them on an individual basis, it has not attempted group loans and the use
groups as intermediaries. These conceptual flaws have led to its
operating with both its human resources and systems considerably stretched.
Each district inspector apparently handles 2 000 loan applications and each
branch, 10 000. With this workload it is impossible to maintain direct
contact with all the borrowers, know their credit-worthiness, or supervise
them effectively. Hence the slippages in loan recoveries, exacerbated by
recurrent drought.

In its small-farm lending scheme the AFC gives loans for two years
(whereas seasonal loans should not be for more than one year), medium-term
loans (2-5 years), and long-term loans for above five years. Interest is
charged at 13 percent per annum. CA farmers' loans are made on the basis
of viability and the experience of the borrowers. In addition, borrowers'
crops are marketed through the boards; this is really the AFC's major
collateral. As a matter of policy the AFC finances up to 100 percent of
clients' needs.

Small farm loans are extended on an individual basis although
groups are encouraged, to lower the transportation costs of inputs and
produce. To explain the AFC's policies and procedures and to process
applications the field staff arrange meetings with farmers, whom they
assist in completing the forms, loan agreements and the stop-orders. (The
latter two are signed by the borrowers at the time of application.) Since
viability is a major criterion no loan is granted for rainfed crops in
Agro-ecological Zone V, an area with low rainfall.

Loans are properly appraised. Although approval procedures are
suitably decentralized, there have been delays because of the stop-order
system followed by the AFC. As marketing boards cannot process all the
payments but must nevertheless continue to make them well into the season,
the AFC is not aware of the borrowers' repayment records until later. This
considerably delays the processing of loan applications.






- 40 -


Loans are disbursed in kind. Farmers get their inputs from the
cooperative unions. Since these do not have the resources to stock up in
advance, they have to wait for orders from the borrowers. Apart from
this, as loan applications are processed late into the season the unions
cannot order inputs enough in advance to ensure timely deliveries.

The AFC, which is supported by a good institutional mechanism, is
experiencing difficulties in its loan administration because of an
excessively centralized supervision procedure and the heavy workload of the
staff. The borrowers' problems are known and when crops have failed, more
convenient debt rescheduling can be arranged; but farmers faced with
mounting debts try to sell their products to the boards under false names,
delaying loan recoveries further.

3.5.5 Community Development Fund

The CDF started in 1984. It operates with a staff of 12, mostly
recruited from the civil service, and has to rely considerably on the
provincial, district and field staff of the Ministry of Community
Development and Women's Affairs with which it is affiliated. Few of the
CDF staff have had any previous training in banking or agricultural credit.
Although at the time of the CDF's establishment provision was made for
special training of staff at both the field and headquarters levels, a
number of constraints have to be remedied. The problems may be summarized
as follows:

(a) Loan appraisal is weak. Some loans have not been correctly
judged. Assumptions are over-optimistic and loans are often
granted for longer periods than necessary;

(b) Approval procedures are too cumbersome and centralized.
They should be simplified to avoid delays;

(c) Field staff, notably district community development officers
(DCDOs) and community development workers (CDWs), should
intensify their supervision of loans. Technical advice and
training given to borrowers are inadequate;

(d) Borrowers are expected to repay loans to the DCDOs, or the
latter are expected to collect repayments during supervisory
visits. DCDOs should not be involved in collections. A
stop-order system should be introduced to ensure recoveries.

The CDF's loan administration should be improved. Projects
channelling funds through it should counterbalance its weaknesses by (a)
simplifying approval procedures; (b) coordinating the training of
beneficiaries by staff; (c) coordinating supervision by staff through
regular visits. This should ensure contact with communities, provision of
timely advice, prompt action and support if borrowers face problems. Such
an approach should lead to better loan recoveries.







- 41 -


3.5.6 Trust Fund projects administered by FAO (007/003)

The projects are implemented by the MCDWA. Essentially they
support groups of farmers with between 10 and 20 members, the majority of
whom are women. The objectives are to increase production and to help the
groups to become more cohesive through training and group savings.
Identification of the groups willing to participate is carried out by CDWs
in consultation with AGRITEX (extension workers from the MOA) and in
agreement with the local ward committees and village development
committees.

Each group is allocated 1 ha of land by the district council to
serve as a demonstration plot. Grants are given in the first year and
beneficiaries are expected to get credit in the second year.

Group promotion Training in savings is one of the first and most
important steps in the development of a group credit scheme as savings,
like joint activities, provide the basis for organization of cohesive
groups, an essential condition for getting credit on a joint-and-individual
-liability basis.

Discussions with groups indicated that there were wide differences
in their cohesiveness. Part of the reason for this disparity arose from
the fact that not all CDWs proved to be equally effective. Groups were
also experiencing difficulties partly because of mixed membership and
partly because of their recent establishment; often there was the
impression that the project would provide immediate economic benefits such
as grants for seeds and fertilizer and a group might be hastily formed to
take advantage of these. Sometimes a number of beneficiaries came
together to form a group simply because they were former members of an
adult literacy class. People who take courses together do not, however,
necessarily make good partners in another sphere of activity.

Although the projects have been under implementation for some
years the mechanisms for channelling credit and the agency to be used have
not been finalized.

Conclusion

On paper Zimbabwe should have developed the most suitable credit
scheme as it has well-developed support services. Unfortunately
administrative problems have arisen, largely because of centralized
procedures and the AFC's insistence on dealing with small-scale farmers on
an individual basis.

4. CONCLUSIONS ON FUTURE ACTIONS FOR PROVIDING CREDIT FOR RURAL WOMEN

The various issues involved in providing credit for rural women
can be summarized from the preceding sections, and conclusions and
recommendations drawn from them, as follows:






- 42 -


4.1 Use of institutions

Institutions set up or selected to administer credit should be
financially sound. When institutions are being considered, their
attitudes should be carefully examined. As far as practicable, existing
institutional arrangements and procedures should be used (and if necessary
strengthened) to channel credit and technical advice to beneficiaries (see
section 2.2.3.2). Because of institutions' reluctance to get involved in
lending to smallholders, which is both risky and expensive, care must be
taken that the difference between the borrowing and the lending rates
covers the cost of personnel, administration and bad debts (see section
2.2.2(a)). Only if this condition is met will institutions be encouraged
to make loans to rural women. Administrative costs should be low. The
creation of separate institutions to support women's programmes could prove
expensive (see section 2.2.1.1).

4.2 Support services and staff

Links among support services should be encouraged. Where
necessary appropriate financial inducements should be provided to extension
and bank staff. This would promote teamwork. Staff should be motivated
and their workload should not be too heavy for them to maintain contact
with borrowers or, most importantly, to identify good farmers. They
should be mobile.

4.3 Administration of credit schemes

The following elements are important in any credit scheme:

(i) Thorough loan appraisal to ensure that loans are given for
viable proposals and to credit-worthy borrowers;

(ii) Timely loan approval, with the approval procedure
decentralized (2.2.2(d));

(iii) Timely loan disbursement, at minimal cost. If the
disbursement is in cash, particularly careful supervision;
if it is in kind, timeliness of input supply, with an
expiry date on purchase orders (3.4.2);

(iv) Staff supervision of how loans are being used, with visits
to beneficiaries at least four times a year, at land
preparation, planting, weeding and harvest. Where credit
institutions use other agencies to provide technical
support, there must be proper linkage with these;
technical support should be coordinated and advice given to
beneficiaries, particularly when new technology is
introduced;

(v) Well-designed loan collection procedures and follow-up.
Monitoring systems should be developed. A regular
department should be set up to ensure that loans officers
are taking action on overdue loans. Where farmers face
difficulties due to acts of God, loans should be
rescheduled and the farmers rehabilitated with fresh loans.
If defaults are wilful no effort should be spared to
collect repayments. If group credit has been extended the






- 43 -


whole group should be declared ineligible for further
borrowing. This rule should be rigidly followed (3.4.2).

4.4 Linkages with marketing

These are not essential. A number of credit schemes perform well
without compulsory sales through marketing boards. Where such systems
exist, however, they should not be too centralized, so that payment to
beneficiaries can be timely. Over-centralization can lead to delays in
administering loans in the following season (see section 2.2.2(d)).
Marketing arrangements should enable farmers to sell their produce in time,
with floor prices guaranteed to achieve at least minimum returns.

4.5 Training

It is essential to train beneficiaries in the obligations of
credit and they should be taught how to handle the necessary paperwork.
Credit schemes for women should include a training component for husbands.
Staff should be trained to recognize credit-worthiness and their technical
training must include enough knowledge of agronomy to assess the
suitability of soil for growing crops (see section 2.2.2(b)). On a
broader base, a concerted effort should be made to educate bankers and
extension staff.

4.6 International agencies

Agencies play an important part in.developing suitable mechanisms
for providing credit for rural women. Hitherto, although the role of women
has been recognized, most international agencies have not developed major
programmes to reorientate existing local institutions. A concerted
programme with adequate financial backing could perhaps achieve the
breakthrough in supporting, strengthening and reorientating these
institutions.

4.7 Design of institutional and project credit schemes

Important aspects of design (see sections 2.2.2 and 2.2.3) are as
follows:

(i) An institutional channel for credit delivery should be
chosen in advance;

(ii) Group formation should take sociological factors into
consideration. People should demonstrate the tendency and
the will to work together before group credit is extended.
Groups must be cohesive and eventually self-managing.
Savings should be encouraged as they stimulate mobilization
of resources and promote cohesion in groups. NGOs have
usually proved effective in forming cohesive groups. Where
possible they should be used if government agencies are
found unequal to the task;







44 -



(iii) Demand for credit should be assessed with emphasis on
reaching people hitherto not reached;


(iv) Design of a scheme should
of progress to ensure
incorporated into ongoing
should be replicable;


include monitoring and evaluation
that the lessons learnt are
and subsequent projects. Designs


(v) Loan packages for women should have a higher provision for
financing the labour required to prepare land.











Table 1

SCHEMES EXAMINED IN THE STUDY


Malavi Sierra Leone Zambia


(a) Specifically
sponsored by
women's
organizations

(b) Not sponsored
but women as minor
borrowers

(c) International
organization
sponsored; with
women as
significant
proportion of
borrowers


1/
2/
3/
4/
5/
6/
7/
8/
9/
10/
11/
12/
13/


Barclaysl/
KWFT 2/


CBK 3/
AFC 4/


PPP 5/
CADRW 6/


YRB 8/
MOA 7/ NWIADP 9/


MOA


Barclays SH 12/
CCS 10/ AFC


(NLFP)11/ (007) 13/
(FINNIDA) (003) 13/
(SIDA) (006) T3/


Barclays Bank
Kenya Women's Finance Trust
Cooperative Bank of Kenya
Agricultural Finance Corporation
Peoples' Participation Project
Community Action for Disadvantaged Rural Women
Ministry of Agriculture
Yoni Rural Bank
North West Integrated Agricultural Development Project
Cooperative Credit Scheme
National Fertilizer Lima Programme
Silveira House
FAO-administered trust-funded technical assistance projects


Kenya


Zimbabwe











Table 2

CREDIT PROJECTS AND DISBURSEMENTS TO WOMEN


Institutional channel

Commercial banks
Rural banks


Non-bank financial
institutions
Ministry

Project

Cooperatives/Coop.
banks
NGOs/trusts
Not specified




(US$ million)

Total estimated
disbursements or
outstanding to agric.
Est. credit to small-
holders

Est. credit to women
in agriculture

% of credit to women


Kenya Malavi


437.0
40.01/


50.0
11.0


5.0 2.2


12.5 20.0


Sierra Leone Zambia Zimbabwe


0.4
0.4


40.0
1.2


150.0 677.4
16.5 69.1


0.1 3/ 1.73/


10.0


8.3


10.3 13.0


No. of schemes promoting 1
lending to women at
the institution's risk

No. of schemes in which 1
institutions bear some
risk in lending to
women


Mission's estimates; smallholder defined as below 5 acres
Negligible in US$
Estimated at 10%


Total


2





Table 3


COMPARATIVE ANALYSIS OF CREDIT SCHEMES


KENYA MALAWI SIERRA LEONE ZAMBIA ZIMBABWE
AFC KWFT BARCLAYS PPP MOA NWIADP PPP CCS NLFP WPRD BARCLAYS AFC 007/003
Type of Scheme Individual Women; Women Mixed; Women's Groups Group Group Co-operative Groups omen's Individual Individual Women's
Major Factors Individual Individual 45% Women, Credit Credit through Groups Min. 4 ha. Groups
and groups Group Lending Co-operatives


A. Related but outside
the control of the
scheme

Input Supply




Marketing




Technical Support






5. Social Factors

Group Cohesiveness




UOeasa Access to
Credit

Physical
Legal

Social


Weak




Payments
delayed



Provided
but
inadequate















Limited
Define
constraints
Land not in
rer name


Finance
activities
other than
crops

Some problems




Minor problems









When formed
no problems







)
)No
)Limitations
)
)


Same as KWPT




Some problems




Minor problems









Not
applicable






)
)Scheme
)designed
)for women
)


Arranged by
project



Some problems




Strong provided
by project







Not ensured,
but groups
seem to have
operated
cohesively



)
)Not a
)problem
)
)


Same problems
but usually
on time


Through Boards




Well co-
ordinated with
extension,
women
extension
staff limited



Groups well
formed







)Encoraged
)Encouraged
)
)
)


On time




No linkage
with
Marketing
Board

Area
favourable
for rice
production





Well
formed






Limited
None

None


None
reported



No linkage
with
Marketing
Board

Provided
by project







Well
formed






Encouraged
None

None


Minor
Problems



Problems




Provided

















)
)Limited
)Membership
)
)


Minor
Problems



Problems




Well
co-ordinated








Strong








66% of
Participants
Women


Minor
Problems



Problems




Provided









Not strong
but groups
have stayed
together




Yes


Co-ordinated




No strong
emphasis



Very strong









Not
applicable






Limited
None

None


Trouble with
Distribution
through Union


Organization
strong but
logistical
delays

Good









Not
applicable






Limited
None

Possibly


Done by
Project



Lack of
transport
could pose
problems

Co-ordination
inadequate
















Schemes
designed
for women
Possibly









Table 3 (contd. ii -)


KENYA MALAWI SIERRA LEONE AMBIA ZIM ABWE
AFC WFT BARCLAYS PP MOA NWIADP PPP CCS NLFP WPRD BARCLAYS AFC 007/003
Type of Scheme Individual Women; Women Mixed; Women's Groups Group Group Co-operative Groups Women's Individual Individual Women'
Major Factors Individual Individual 451 Women, Credit Credit through Groups Min. 4 ha. Groups
and groups Group Lending Co-operatives

C. Institutional
Aspect

Staffing Over- Low Not a Controlled by Satisfactory Adequate Adequate None None None None Low Not ell
stretched constraint project

Oranisatlonal Accounts )Inadequate None ) Women ) )Self- None None Arrangements Very good Problems with Poor
Constraint. weak, little )funds )Implemntad... Extension )None )enclosed apparent with ZCF not accounts, co-ordination
follow-up )leading to )by project.. staff not ) )project well spelt inadequate
)lack of ) mobile ) ) out oloup
)mobility ) ) )
)snd ) ) ) None Strong Unions do not Firm contact Poor Good
Contact with Inadequate )supervision Through KWFT ) ) ) a with
farmers ) ) ) ers

M.I.S. Poor Poor Good Good Good Good Good Good Good Good Good Poor Underd


D. Lending Policies

Size of Loan Fixed Limited to Limited to In packages Adequate Adequate A adequate AdAdqute Adequqte Adequate Adequate Adequate
max. of Ksh.50,000
Kah.20,000 )Scheme not

Type of Loan Seasonal )For off- )For off- Seasonal Seasonal Seasonal Seasonal Seasonal Seasonal Seasonal Seasonal Seasonal )operated yet
)fare )farm 2)
Term of Loan 2 years )activities )activities 1 year 2 years 1 year 1 year 1 Year 1 Year 1 Year 1 Tear 2 ears )
)and short-
)term )

Type of t In-kind In cash In cash In-kind In-kind In-kind In-kind In-kind In-kind In-kind In-kind and In-kind
Disbursements )

Linkages with Too strong None None Yes Strong None None Strong Strong Strong Not necessary Strong
Marketing delays in )
payments





Table 3 (contd. iii)


ZAMBIA ZIMBABWE


KENYA MALAWI SIERRA LEONE
A IP Ppp CCS NLFP WPRD BARCLAYS AFC 071/003


______ "'* -- -- ----- ----- n Comena, Individual Individual Wotn'a
Type of Scheme Individual Women; Women Mixed; Women's Groups Group Group Co-operative Groups Womnsi l Ind l groups
Major Factors Individual Individual 45% Women, Credit Credit thtoul h Groups nln. 4 ha. Groups
and groups Group Lending Co-opratives

Interest Rates 14% 12.5% 19% n/a 10% 20% 14% 16% 16% 16% 31Z 13%

SFinancing n/a 110 100% excludes 100% 100 i includes 100% excludes 100% excludes 100% excludes 100% excludes 10 excludes
labour labour labour labour labour labour labour

Loan Conditions

Savings No )Open ) Done through )None None Done through None None None None None )Not
)bank )Open loans ) loans )should
)account, )bank ) conformu to
Security ) whateverr )account, None )Croup )Group )Group euruo
)None )available )whatever )Liability )Liability )Liability None None None None required to )institutions
)required )available ) ) ) open account )handling
)required )available ) ) ) None None creditt
Guarantee ) ) Group Liability ) ) ) es None None None one credit

Other ) ) ) ) Must be Should join None None None )
member society as
group

I. Loan Administrtion

Emphasis on Poor Strong Strong Strong Strong Poor Poor Strong Poor Left to Very Strong Poor Poor
identification of Project
borrowers

Education of Missing Strong Through lWFT Strong Direct Role Direct Strong Strong Strong Not direct Not direct Lending To be
Borrower Bole Policies Introduced
orrowr Role explained


Loan Approval Tedious On Time On Time On Time On time On Time On Time On Time On Time On Time On Time Delays
Procedures involvement of
outside
agencies

Loan Disbursements Delays On Time' On Time On Time On Time On Time On Time On Time On Time Delays On Time Delays


r











Table 3 (contd. iv -)


KENYA MALAWI SIERRA LEONE ZAMBIA AZIMBABWE
AFC KWFT BARCLAYS PPP MOA NWIADP PPP CCS NLFP WPRD BARCLAYS AFC 007/003
Type of Scheme Individual Women; Women Mixed; Women's Groups Group Group Co-operative Groups Women's Individual Individual IWoen's
Major Factors Individual Individual 45% Women, Credit Credit through Groups Min. 4 ha. Groups
and groups Group Lending Co-operatives

Loan Supervision Moderate Strong Through KWT Strong Strong Adequate Strong Strong Strong Strong Strong Poor

Follow-up on Poor Strong Left to KWFT Strong Strong Adequate Strong Strong Strong Strong Strong Poor
Overdue Loans

F. Liability of


Recovery Rates 50-60% 80% 100% 90-95% 95% lus 90-100% 90% 80-90% 95Z 60-70% 80-90% 60-70% n.a.

Admitstrative 7-8Z n/a n/a High 5-6% 14% 100% 20Z 20% 20% 11% 15% n.a.
Costs

aRplicability of Yes Yes Doubtful: Yes Yes Doubtful: Yes Yes Expensive yes; Yes Yes Yes, but needs
Scheme too expensive too expensive needs to introduce
modification co-ordinstion

C. Political Weak Weak Weak Weak Strong Weak Weak Weak Weak Weak Weak Strong Strong
KnTiroansnt
Iaforcigl
Recoveries

. Mjor Problems 1. Over- Lack of funds 1. Barclays Bank has little Expansion of None Too None: very None Major Problems None Major AFC faces Needs to:
burdened by finds role on loan staff in major expensive well thought encountered logistical (I) form
Government new procedures too administration Women's out schee as schee problems in better groups,
seasonal centralized. which is done Programmes developed dealing with (ii) introduce
credit scheme 2. Having by staff. Thus could lead to procedures too any savings, (iii)
little time to serious farmers contact with different accounts, identify
deal with difficulties dependant on greater number from those of delays are viable
borrowers. finding viable project staff, of women. CCS common due to projects. (iv)
2. Inputs late. proposals for Expensive centralized ensure
3. Marketing financing, scheme cannot adnistration co-ordinated
despite good support to
Boards delay 3. Would like be easily institutions beneficiaries
payments. to see greater replicated.
technical
support to
beneficiaries.























Table 4

NUMBER OF BORROWERS, DISBURSEMENTS AND RECOVERIES IN SOME
ZAMBIAN CREDIT SCHEMES

Borrowers Disbursement % recovery
(ZKw. 000)

CCS 11 005 6 005 87
NLFP 266 130 93
WPRD 773 41 73
PAP 318 45 57







Chart I

CREDIT APPLICATION TIMETABLE
OF ZCF-FS


ACTIVITY 1 Jan. 15 Feb. 15 March 15 Apr. 15 May 15 Jun. 1 Aug.
15 Feb. 15 Mar. 15 Apr. 15 May 15 Jun. 31 Jul. 15 Oct.


General Meeting resolution to use CCS, sent to
Union Board.

The Union and ZCF/FS approve or reject the
Society's application. They send individual
application forms to societies with approved
applications.

Members give their loan applications to societies.

The Society Board decides on applications, within
the Society's limit. Then they send the
applications to the District Officer. Union and
Department staff examine the forms and send them
to Union headquarters.

Union decides on applications and tells the
successful societies through its district office.

Union tells ZCF/FS how much money is needed.
ZCF/FS approves the amount for each society in
the Union.

LPOs are processed, debts recovered, crops
checked and supplies delivered.


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MIS6048E/1/9.88/600




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